Could I save money with an Economy 7 energy tariff?
"I want to save money on my energy bill, and I've heard that an economy 7 tariff gives you cheaper rates at night, but would it actually be any better than the deal I'm currently on?"
Last week, Green Energy launched Tide, a "time-of-day" tariff that charges their dual-fuel customers any of three different rates depending on when they use their gas and electricity.
It uses smart meters to determine when exactly and for how long people are consuming energy, using the more accurate data to calculate a more personalised bill that could save some customers money.
However, it's not actually the first ever tariff on the market to offer different rates for energy used at different times of the day. It was preceded by the Economy 7 tariff, which as its name suggests provides customers with a cheaper rate - albeit only for their electricity - for seven hours each day, usually at night.
But like Tide, the question remains as to whether households can save money on their annual energy bills with an Economy 7 tariff. Well, as the following FAQ makes clear, it all depends on your particular circumstances...
How does an Economy 7 tariff work?
First of all, to benefit from an Economy 7 tariff, a household must first have an Economy 7 meter installed in their home, rather than a standard meter. You can check whether your current meter is an Economy 7 one by looking for whether it has two separate rows of numbers: one marked "normal" and one marked "low".
If it doesn't, then you need have one installed, which will be done once you've contacted your supplier and signed up for an Economy 7 tariff.
Once installed, you're ready to go, with your new Economy 7 meter taking two different readings for two different periods during the day. The second one of these - marked as "low" on the meter - can last from 11.00pm to 6.00am, 12.00am to 7.00am, or 1.00am to 8.00am, depending on your supplier.
As with all energy tariffs, the different rates you receive for both periods varies with supplier. As an example, EDF's Economy 7 version of their standard variable tariff (in the South East) gives a rate of 18.84p per kWh during the day and 6.85p per kWh during the night. This is compared to a single unit rate of 15.72p per kWh for the SVT without Economy 7.
One important thing to underline at this point is that the day rate on an Economy 7 tariff is noticeably higher than the single rate for a comparable non-Economy 7 tariff. You therefore really have to use more electricity at night than you normally would, otherwise you'll end up losing rather than saving money.
So how much electricity would I have to use at night to save?
Continuing to use EDF's rates as a benchmark, the threshold at which a household begins saving money can be estimated like so.
For the sake of simplicity, let's say you're a "typical" [PDF] UK household consuming some 3,300 kWh of electricity per year. This means that, on EDF's non-Economy 7 SVT, you'd be paying £518.76 per year for your electricity (forgetting standing charges, which are the same for both kinds of tariff).
Let's now assume that you're on an Economy 7 and that, of the 3,330 kWh of electricity you consume each year, 70% is used during "day" hours. This is equal to 2310 kWh charged at 18.84p, which puts the annual total of "normal" energy at £435.20.
So far so good, but with the remaining 30% of energy - 1020 kWh - charged at 6.85p per kWh, you still have to pay an additional £69.87. As such, the grand total comes to £505.03.
This is some £10 less than the non-Economy 7 SVT, making the Economy 7 version just about worthwhile for those who can use just under a third of their electricity during the wee hours.
And what about fixed tariffs?
Of course, it should be remembered that this is compared to a normal standard variable tariff, and that it would generally be more difficult to make savings against a cheaper fixed tariff.
To demonstrate this, the table below compares our example SVT and fixed tariffs with their Economy 7 counterparts.
|Economy 7 Standard Tariff||Normal Standard Tariff||Economy 7 Two-year Fixed||Normal Two-Year Fixed|
|Day rate||18.84p per kWh||15.72p per kWh||17.47p per kWh||14.03p per kW|
|Night rate||6.85p per kWh||15.72p per kWh||6.27p per kWh||14.03p per kW|
|Annual electric bill for 100% daytime consumption||£621.72||£518.76||£576.51||£462.99|
|Annual electric bill for 30% night-time consumption||£505.03||£518.76||£470.87||£462.99|
|Annual electric bill for 40% night-time consumption||£469.10||£518.76||£433.92||£462.99|
|Annual electric bill for 50% night-time consumption||£427.75||£518.76||£391.72||£462.99|
As can be seen from the table, the average household on a fixed tariff has to go beyond 30% - to something like 33% or 35% - before they begin making savings compared to a non-Economy 7 fixed tariff.
If nothing else, this goes to show that if you're on a competitive tariff anyway, you probably needn't consider an Economy 7 tariff unless you can move a big portion of your energy consumption to the evening.
But what do I have to do to get to at least 33% night-time energy consumption?
This is the question, for the matter of whether an Economy 7 tariff is advisable or not doesn't simply hinge on the optimal percentage, but on the kind of lifestyle you lead.
Not only that, but it also depends on the kinds of appliances you have. For example, if you have dishwashers, washing machines and slow cookers that can be set to run overnight, then you'll find that you're more likely to cross the 33% threshold.
This is because dishwashers and washing machines respectively use about 294 and 166 kWh per year, while a slow cooker offers a marked improvement over hobs and ovens, which soak up 226 and 317 kWh of energy respectively.
Similarly, if you have an electric storage heater then you could charge it overnight, enabling it to emit heat gradually over the course of the following day. The same also applies if you have a hot water tank, which offers considerable scope for savings insofar as hot water accounts for up to 10% of the average energy bill.
With these kinds of measures, you'll make considerable headway towards reaching the all-important 33% night-time energy consumption needed to begin saving money.
Getting beyond 33%
However, given that there are plenty of energy-consuming items - televisions, computers, kettles, fridges, hi-fis, traditional light bulbs - that can't be used solely night, the average household would have to work very hard to get beyond the initial 33% and make any substantial savings.
Televisions, for instance, consume anything from 50 kWh per year to 600 kWh, depending on whether you own an efficient modern LED TV or a Plasma model. Desktop computers require 150 kWh a year, while kettles sap 167 kWh each year on average.
In view of such demands, it's unlikely that the average family could push to, say, 40% night-time use, when savings become significant.
It's for this reason that, while Economy 7 plans might be relevant to the most energy-savvy households, it's generally to be recommended mainly to people who work shifts in the evening.
These are the people who already sleep during the day and consume most of their energy in the evening, so it wouldn't require a massive reform in lifestyle to make the most of the tariff.
Otherwise, an Economy 7 tariff arguably isn't worthwhile for most other people, since it requires such an adaptation that any modest financial savings are potentially outweighed by the inconvenience of having to alter how your house operates.
Still, it remains something to consider, and for those who are willing and able to do all their washing and cooking at night, it might be worth drawing up a tally of your energy consumption, to see if you can shift more than 33% of it to the evening hours.