Our energy system is on the cusp of a huge digital transformation that will enable integration of renewable energy sources at a large scale.

Part of this transformation will be the introduction of dynamic energy pricing – that is, pricing that responds to the supply and demand of energy.

At present, our system relies on sources of energy that can be easily turned up to meet peaks in demand. We can’t turn the sun or wind up and down when we need them, so we have to rely on carbon fuelled generation as a constant back up.

However, if we could find ways to level out the peaks and troughs in energy demand, rather than responding to them, we could take some of the pressure off the system. And if we can manage the demand better, we can make better use of the renewable, more variable, energy sources we have available.

A way to do this is to incentivise customers to use less when supply is low or demand is high – to nudge people to use their tumble driers at times of low energy demand, or cheap to charge electric cars when the wind is blowing.

For truly responsive time-of-use tariffs, suppliers need an accurate measure of demand, and householders need to know when energy is cheap or expensive via visible price signals. Smart meters play a key part in making both of these happen.

Dynamic time-of-use tariffs aren’t possible without smart meters

So I was very interested to read questions in David Toke’s recent Ecologist article about whether smart meters will be able to support flexible pricing. Smart meters are being installed in every home and small business in Britain as part of a national upgrade to our energy infrastructure.

They’re replacing the analogue meters that haven’t changed much since the 1880s, showing us in real time what we’re spending on energy and connecting our homes to a more intelligent grid.

Every smart meter installed as part of Britain’s rollout will be able to support flexible pricing. What’s more, dynamic time-of-use tariffs aren’t possible without them. Flexible demand management and pricing needs half-hourly energy readings. Only a connected, digital system based on smart technology can provide this.

Some energy suppliers, both large and small, are already offering time-of-use tariffs to their smart meter customers. As the smart meter rollout progresses, other suppliers will be able to provide similar and even more dynamic tariffs.

But flexible tariffs are really just the beginning of a smarter energy system. As more households become connected, the market for technologies that will help people take advantage of these new pricing strictures will pick up pace too.

Appliances responding to power supply moment by moment

Over the next decade, people will be able to connect smart appliances that can switch on or off automatically in response to demand and supply. Again, smart meters are central to these developments.

By connecting to the Home Area Network (HAN), the smart meter’s communication system, appliances could receive alerts from suppliers when demand is low or high. This could, with the customer’s permission, enable devices to be switched on or off automatically.

So when the sun is shining, high energy use items like electric vehicles and storage heaters could be set to charge automatically. Or customers could choose to receive prompts to turn their washing machine on, or avoid using their dishwasher, depending on the demand on the system, and the price of energy.

Equally, smart meters will make it simpler and more attractive for people to generate their own energy at home. By using microgeneration technology connected to the smart meter’s HAN, along with storage batteries, it will be easy for householders to decide when to use the energy they are generating through their solar panels or turbine, and when to store it or export it to the grid.

Smart technology is already enabling innovative projects for communities who want to be more self-sufficient when it comes to energy – harnessing renewable energy sources using price signals. Households in Bethesda in Wales are already using smart meters to purchase the power generated by a local hydro scheme, at half the usual price – directly benefiting from renewable energy.

Smart meters are already changing the way that consumers use energy day to day – more than eight in ten people with smart meters have taken action to cut down their energy use. And flexible pricing will only build on that behaviour change.

Peer to peer energy trading?

In addition to these changes in the day to day use of energy, smart meters have the potential to create a huge transformation in the energy market as a whole. In a recent paper for Smart Energy GB, Dr Jeff Hardy of University College London lays out some of the emerging innovations that smart meter data is making possible.

Firstly, he identifies the opportunities to expand peer-to-peer energy trading. A connected network will make it easier for individuals and communities to generate and trade energy locally – encouraging more small scale, sustainable energy generation.

Secondly, he foresees the development of energy service companies, which provide holistic packages to power or heat homes, rather than just selling units of energy. Meaning people might sign up to a contract for a ‘warm home’, which could include energy efficiency updates, as well as the supply of energy.

And finally, he sees third party control becoming more common. Meaning people can sign up to services to be switched to the best tariffs immediately. This will force competition and greater innovation in the market – including more innovative, flexible tariffs.

The smart meters being rolled out to households across Britain are an essential part of a smarter and greener future where consumers have more power over the energy they use at home, through the real-time information on their energy use, and where they can play their part in balancing the demand on the system, through flexible pricing and renewable energy.

Article this is responding to: ‘Green groups must denounce the sham ‘smart meter’ scandal‘ by David Toke.

Claire Maugham is Director of Policy and Communications at Smart Energy GB. Smart Energy GB is the voice of the smart meter rollout. Its task is to help everyone in Great Britain understand smart meters, the national rollout and how to use their new meters to get their gas and electricity under control. Its national campaign is reaching all households and microbusinesses in England, Scotland and Wales.

For more information visit smartenergyGB.org.