This winter, UK households can get paid to help prevent grid blackouts

The U.K. grid is staring down potential fuel shortages this winter. Consumers are now going to get paid to help alleviate those shortages, and at an unprecedented scale.

Starting November 1, customers of Octopus Energy, Britain’s fourth-largest electricity retailer, will get paid if they reduce their consumption during hours of peak grid demand. It’s an effort to shift usage away from hours when the nation’s gas supplies will be stretched thin and toward times when renewables can cover more generation.

In Britain, competitive power generators run power plants, and retailers manage the delivery of power to customers. But this winter, there may not be quite enough fossil gas to heat buildings and to burn in power plants to produce on-demand electricity. Russia’s invasion of Ukraine sent gas prices spiking in Europe, so the U.K. is paying far more for energy than it used to and struggling to store up enough for the cold season.

For decades, grid planning meant figuring out the highest level of demand at a given moment, and then building the grid to meet it. But it can be considerably cheaper to reduce demand in scarce hours, if there are tools available to coordinate that. That’s where the U.K. is breaking ground right now.

National Grid, which operates the electricity network in much of the U.K., wants to secure up to 2 gigawatts of flexible demand to plan for whatever might happen this winter. To help with that, the grid operator made a technical but significant change in the runup to the winter: It will now allow households to collectively supply the grid by reducing their consumption during crucial hours.

“We can get to similar outcomes at much cheaper cost by working with customers in the right way,” said Michael Lee, CEO of Octopus Energy’s U.S. branch.

The London-based startup will invite its U.K. customers with digital smart meters — 1.4 million homes and some 5,000 businesses — to participate, targeting around 250 megawatts of grid capacity. National Grid will identify tight hours for grid supply on a day-ahead basis, and Octopus Energy will tell its customers when to cut back on usage, likely between 4 p.m. and 7 p.m.

Households don’t need fancy appliances to participate, though solar-powered batteries or flexible electric-vehicle chargers could certainly help. But shifting the use of washers and dryers and electric stoves to other times of day can make a dent. Octopus Energy’s software will track the total kilowatt-hours of usage avoided during the specified windows, as measured against typical usage during the same time, and will pay people for their performance.

The company expects to pay £4 ($4.59) for each kilowatt-hour shifted, and calculates a typical participant could earn £100 ($114.67) over the winter season. 

“In the world of inflation, price and value are top of mind,” Lee said. ​“A lot of people are excited about finding ways to reduce their cost.”

In any customer-participation scheme, operators need to find the right level of reward to entice people to bother with it. This typically involves a bit of guessing and checking. Octopus Energy got a jump on that this spring when it ran an internal pilot of the same concept. It invited 300,000 retail electricity customers to shift their usage during scarce hours for just 23 pence per kilowatt-hour. Some 100,000 people took up the offer.

That’s a remarkable scale for any sort of grid pilot; traditional utilities are more liable to test something innovative with dozens of customers and study the data for a few years before taking it mainstream. But if 23 pence was sufficient to draw 100,000 people, the new payout rate, which is about 17 times larger, will likely be considerably more appealing.

If this plan succeeds in delivering meaningful reductions in power demand, it could become a model for low-cost ways to avoid outages elsewhere, whether from geopolitical energy crises or climate-related extreme weather.

The concept of mobilizing the public to avoid grid crises has been gaining momentum. California begged customers to reduce their usage to stave off a blackout in August, and it worked. But efforts to formally reward Californians for their help have lagged behind the need. In Hawaii, the shutdown of a major coal plant prompted the state to pay households for using batteries to share solar power in the evenings. That’s a more robust form of participation than toggling the thermostat, and the payouts reach several thousand dollars.

But convincing households to install batteries is a much heavier lift; the Octopus Energy approach is notable for its extremely low barriers to entry. The primary hurdle isn’t technical: It’s winning the trust of customers so they bother to participate at all.

“Where a lot of our industry loses the script is, we’re energy nerds and we like the details,” Lee said. ​“But we need to communicate with customers in a way that’s consumer-friendly. If you’re selling an invisible product, then you need to have trust as a core tenet of that relationship.”

Octopus Energy takes creative approaches to trust-building. It boasts a cute pink Octopus logo and staffs its call centers in the same regions as the customers they speak with to build familiarity. The company pledged to donate its profits this winter to help customers who are struggling with soaring energy prices.

During a heat wave in Houston last year, Lee said, the local branch of Octopus Energy bought out a bar and gave customers free cold beers if they left home with the thermostat set up at 80 degrees.

Octopus Energy already supplies its retail customers with power sourced entirely from renewables. Now it’s pushing to activate its customers in the mission to operate the grid in a way that’s less dependent on fossil fuels. And it’s doing so entirely with tools that are already available, rather than nice-to-have technological breakthroughs.