Social distancing plus sunny, windy weather means AgileOctopus prices plunge

On Sunday 5th April, thousands of customers on our AgileOctopus tariff got paid to use power between 10.30 and 4pm. Agile is a smart tariff, designed to pass on the highly changeable market price of electricity to customers as a way to reward them for using power when there’s lots of renewable energy on the UK grid, and less demand for it. Sometimes, prices even go negative, and customers are paid for the power they use.

First, how do Agile price plunges happen?

The wholesale value of energy changes every half an hour, based on factors like energy demand (i.e., how much power homes and businesses will use in total at that time) and what types of fuel are available.

Energy demand is particularly important in pricing because the energy grid always has to be balanced. For every lightbulb and kettle that gets switched on around the country, there has to be an exact match for that power being pumped into the networks. When demand is lower than usual, the grid can end up with too much power and risk becoming unbalanced, which could in some cases lead to blackouts. To avoid situations like that, when demand is low, the grid needs to discourage generators from producing energy, and wants to encourage suppliers to take more energy – and this happens by the value of energy going up and down. When there is too much power in the system the grid can sometimes even pay for suppliers to use more or generators to produce less – and that’s when prices can go negative.

While most conventional energy tariffs smooth out these price fluctuations for consumers, AgileOctopus passes them on – so customers can get the benefits of free or cheap energy, and are empowered to decide for themselves if they want to use less when power is in high demand, or to use more when there is a surplus.

All past Agile ‘price plunges’ we’ve had have been in the early hours of the morning, when few people are using energy (so demand is really low) and there’s lots of wind blowing. This time, for the first time ever, we had a nearly six hour price plunge throughout the day!

So, why was there a daytime price plunge on Sunday?

Have a look at the graph below for a good visualisation of what happened...

The Coronavirus outbreak has caused a big overall decrease in the UK’s total energy demand.

While household energy use is going up, business energy use is going way down. It’s true that many of us are at home using more energy than we might’ve before, though it’s a lot less than you might think as we’re starting to come into warmer weather so high heating bills are coming down. Our data scientists have used smart meter readings from 60,000+ homes to work out that the average isolating household was using around 4% more energy in the very first week of social isolation (read their full findings here). But the outbreak has also meant lots of big industrial buildings with far higher energy demand – from large offices and factories to pubs and shopping centres – have had to shut their doors. This big drop in business energy consumption far outweighs the small increase in domestic energy consumption. Overall, the UK’s energy demand is down somewhere between 9-13%.

Then, on Sunday morning, the especially sunny and windy weather brought a surge in renewable generation. This, coupled with the UK’s lower energy demand, meant that renewables provided a record-breaking share of the UK’s energy needs on Sunday – 40% from wind and almost 20% from solar.

This combination of factors meant market energy prices went negative, and so Agile prices plunged: