We talk a lot about time of use tariffs, but now there’s a new kid on the block - type of use tariffs. The first of these has been announced by energy supplier OVO and is designed to reward EV owners with lower cost car charging.
What is a type of use tariff?
A type of use tariff is one that charges you a different rate depending on what you are using that electricity for. In OVO’s case, customers will pay a different price for electricity used to charge their car than for that used in their home (providing they have an OVO EV charger). The obvious advantage is that you don’t have to schedule certain activities, like ensuring your EV is topped up when you need it, around particular time slots. On a wider scale, type of use tariffs can help promote low carbon lifestyles by making specific choices like electric cars even more affordable and appealing.
OVO’s Drive Anytime plan
To take part in OVO’s type of use tariff, called Drive Anytime, you need to be an OVO customer and charge your EV via an OVO smart charger.
You would then pay 6p/kWh for car-charging electricity, and your regular rate for household electricity. In real terms, you’re billed at the normal rate for all your electricity usage, but at the start of each month you receive a credit against that used to charge your EV in the previous month.
Example: In one month, you use 350kWh of electricity in your house and 350kWh to charge your car. Your regular rate is 16p/kWh, so for the month you are billed £112 (700 x 0.16). You receive a credit of £35 (350 x [0.16 - 0.06]) for EV charging.
OVO is currently testing this tariff with a small number of existing customers, ahead of an expected national rollout later in the year.
It’s also worth noting that while OVO claims its tariffs provide 100% renewable energy, it doesn’t source the power directly from generators itself but relies on REGOs - a contentious form of certification some regard as greenwashing.
Type of use tariffs are just another example of the innovations coming from this age of transformation in the energy market.
Many suppliers offer time of use tariffs - some with cheaper rates outside peak times, others designed for low cost overnight EV charging. They are also a great way to make use of home batteries by storing up power when it’s cheap and then using it during the peak periods. OVO is also a key player in the emerging V2G field.
Octopus, known for trialling smarter energy platforms, has recently announced a ‘Fan Club’ tariff that gives customers close to its turbines cheaper rates when it’s windy. We are also a big supporter of the company’s Tesla Energy Plan, designed for solar and battery owners.
Will it catch on?
More sophisticated tariffs are proving popular with early adopters and will certainly form a part of a more dynamic grid as we transition to net zero. But while time of use tariffs just need a smart meter, type of use tariffs will require smart versions of whichever activity is being billed separately. This could make a big difference to applications like electric cars or heat pumps, which are likely to add significantly to homeowners’ electricity demand, however, so it’s definitely something to watch.
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