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Consultancy case study

Assessing the benefits and risks of dynamic tariffs for consumers

This project investigated the potential for energy bill savings for European consumers using dynamic time-of-use tariffs and heat pumps.

 

The client background

Following new EU legislation that requires large energy suppliers to offer dynamic time-of-use tariffs to consumers with smart meters, BEUC (Bureau Européen des Unions de Consommateurs) and their members wanted to understand how best to advise their consumers about such tariffs.

Dynamic time-of-use tariffs are energy tariffs for which the price of energy changes throughout the day, typically on a half-hourly basis. Consumers are notified of prices for the coming day via an app and can adjust their energy usage to lower their energy bill. Dynamic pricing represents an opportunity to for consumers to save with the added potential risk of higher bills. The outcome is dependent on customer behaviour.

 

What the client needed and their key question(s)

BEUC, the European Consumer Organisation, is an umbrella group of consumer rights organisations across Europe. Their key questions for this project included:

  • What is the likely impact of a dynamic tariff on their energy bill?
  • To what extent would consumers need to change when they use their devices to achieve savings?
  • What are the cost risks for consumers that do not change their energy usage patterns?

 

BEUC particularly needed to understand what advice to give to consumers considering switching from using a gas boiler to a heat pump for heating their homes, in addition to how dynamic tariffs would affect Electric Vehicle (EV) owners. These consumers, stand to benefit the most due to their high electricity demand. The project focused on archetypes for apartments and semi-detached homes in Italy, Spain, Belgium and Hungary.

 

Our solution

Our study combined retail dynamic tariff price data from two years of wholesale price data with network charges, supplier mark-up and taxes. We modelled three different energy usage behaviours to represent consumers with different levels of engagement in flexing their energy usage. We incorporated into our model representative energy demand profiles for heat pumps, EVs and 18 other devices, allowing different degrees of flexible usage for each device.

 

Our impact

LCP Delta’s market-specific understanding of heating and EV usage ensured our analysis was accurate and insightful for each market. BEUC will publish the report in April 2024; LCP Delta will support marketing of the report to ensure the findings reach a wide audience.

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