The Crime of Economy 7

First of all let me make this clear the concept of the Economy 7 domestic electricity tariff is excellent. It is just the execution that is flawed. (Wikipedia description here)

Economy 7 is a scheme dating from the 70's. Basically the consumers electricity is provided on two separate tariffs. The daily tariff is more than the night-time tariff. The night-time tariff is significantly lower than the median price. This is because during the small hours, electricity demand is low.

At night, electricity  generated from base load generation is often barely required and much generation capacity is wound down to minimum (and inefficient) levels.  During these quiet periods, generators sell their electricity at knock down prices. The theory of Economy 7 is that consumers can cash in on these quiet periods by using cheap electricity at unsocial hours.

Initially the driving force was to provide energy for night storage heaters. They  used the surplus night time electricity to provide heat during the day. Often derided, night storage heaters do not really deserve their dreadful press. True, they do have their limitations. But night storage heaters were the first practical example of domestic energy storage - which has yet to be beaten.

The practical problem with Economy 7 is that it impacts on the huge profits made by the utilities selling it. If the electricity at night is sold at half the day time tariff, even after winding their margins up, the utilities still earn less from each KW/hr than they would from a flat tariff. Utilities don't really care if the night-time energy goes to waste. They also know that most Economy 7 customers have night storage heaters and have no choice but to use Economy 7.

To ensure their (guaranteed) profit stays as high as possible, the utilities charge Economy 7 customers double for day time electricity so the 7 hour night period price can be halved. An Economy 7 customer needs to use at least 40% of their electricity during the night period which is 29% of the day. They need to do this just to break even.

If there was any common sense to this we would all be on Economy 7 tariffs, but at fair differentials not ones dictated by greed.

More of us would use washing machines and other heavy load appliances during the slack periods. This would make better use of our available electrical resources. There would be less waste, and actually less wear and tear on the infrastructure of the grid.

But the massive profits of British Gas, RWE nPower and the others would take a (slight) knock. But no government has yet had the guts to suggest the utilities should behave responsibly.

So don't expect ground-breaking Economy 7 deals any-time soon.