What caught my eye this week.
After several false alarms, the past week saw National Grid throw the switch on its demand flexibility service [1].
Like much else in modern life, there’s a bit of double-speak going on here.
The ‘service’ on offer for those taking part actually involves degrading something we in the UK take for granted – electricity at the flick of a switch, whenever we want it, and the luxury of use without guilt or much thought.
Instead those who sign-up (and who must have a smart meter) are paid an incentive for using less power than they normally would during set peak periods.
For example, on Tuesday from 4.30pm to 6pm window.
According to The Guardian [2]:
During the trials, typical households saved about half a kilowatt hour, which will be worth about £2 on Tuesday, putting the cost to National Grid at £2m. Those funds will be passed on to those participating, with suppliers keeping a share to cover their costs.
In total, National Grid is expected to pay just over £3m to suppliers for the service over Monday and Tuesday – with about £850,000 on the first day, and £2.1m for the longer session on Tuesday.
Octopus Energy – which has been running trials since early last year – reckons [3] 400,000 of its customers took park in Tuesday’s session. They were offered £4 for each kilowatt hour of electricity they avoided during the hot zone.
(Interestingly, that incentive had been bumped up on account of National Grid lifting its payouts. Competition counts.)
In total more than £1m was paid out to Octopus customers on Tuesday. That’s meaningful money. But of course you have to divide it by the large number of customers taking part.
Which in turn leads to headlines like This Is Money’s [4] ‘Would you switch off your cooker and washing machine for an hour to save 39p?’
Cognitive load
While the This Is Money angle rankles, I don’t blame it for going there. The small amounts saved do seem derisory if you pay attention to them.
Even doing it every week isn’t going to move the dial for many families. It’s been estimated that Octopus customers who took part in 25 powering-down events over winter might save just £100 in total.
That’s not nothing, but there are easier ways to save money than having to think about how you’re using energy a couple of dozen times for three months.
Instead, just remembering to never use big electrical appliances between 4.30pm and 6pm every day would cut the cognitive load. But at some point you’d presumably stop saving money that way, as your smart meter would get wind of your new pattern of usage.
Which means there’s actually an incentive to keep using power at peak times during the rest of the week. That seems a perverse incentive!
Vanishingly beneficial
With all that said, as a prophet of environmental danger [5] myself I’m all for this direction of travel.
The key is for the system to become invisible, and ubiquitous. All consumers should have smart meters and their bills should be lowered whenever they use more energy outside of peak demand. These peak times should just become generally known, the same way we all understand that if we want to travel at rush hour there will be crowds.
Consumers shouldn’t have to police their bills to ensure they see savings. And in time AI and other smart home features should respond to known patterns of demand, too.
For example, you might switch on your washing machine at 5pm only for it to chirp back: “Do you want to wait until 6pm to save money?”
An emergency load can still get done. But I’d bet 90% of washes would simply be punted forward to beyond the peak period.
Every little helps
Apparently Tuesday’s scheme saved energy equivalent to the city of Liverpool shutting down for an hour.
That’s a result, and I think this will scale.
Critics of renewables understandably raise issues about intermittent supply, peak demand, storage and so on. There’s no single killer fix, but I believe there are myriad small fixes – from using electric vehicles as a vast distributed battery to devising fossil fuel power stations optimised explicitly for short-term back-up, to these sorts of energy demand schemes.
Nobody said it will be easy, but if saving the planet involves not tumble drying my underwear at 5pm on a Tuesday then sign me up.
After that signing though, I don’t want to have to think much about it. That’s crucial.
Enjoy the links, and have a great weekend!
From Monevator
The excellent Vanguard cash interest rate hiding in plain sight – Monevator [6]
Swap rates and mortgage rates – Monevator [7]
From the archive-ator: Beware the lure of the exotic – Monevator [8]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
British business output falls at steepest pace for two years – Yahoo Finance [9]
Plans for more banking hubs as branches close – BBC [10]
UK equities no longer a ‘must own’ asset class, warns shareholder group [Search result] – FT [11]
CBI boss urges Sunak to show more ambition on economy – Guardian [12]
Flybe: all flights cancelled as airline ceases trading – Guardian [13]
“I was lied to by Boris Johnson”: UK fishing industry waiting for [*cough*] Brexit benefits – iNews [14]
[15]
Post-pandemic, more people are feeling disengaged from their work – NPR [16]
Products and services
Happy 30th birthday to the ETF [Search result] – FT [17]
Banks slash mortgages rates, as five-year fixes edge back 4% – This Is Money [18]
Low-cost housing: how can you escape the rent rat race? – Guardian [19]
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor [20]
Santander launches new £200 current account switching bonus – Which [21]
Netflix crackdown on password sharing to begin in coming months – Guardian [22]
NS&I boosts premium bonds prize fund again, now 3.15% – Be Clever With Your Cash [23]
What can we expect from the upcoming pensions dashboard? – Which [24]
English homes where your money goes further, in pictures – Guardian [25]
Comment and opinion
How long is the long term? – Retirement Researcher [26]
Is this the start of a great buy-to-let sell-off? [Search result] – FT [27]
Learning the hard way: [US] 2022 portfolio rankings – Portfolio Charts [28]
Challenging Morningstar’s Safe Withdrawal Rates [Two weeks old] – Alan Roth [29]
Walking around money – Humble Dollar [30]
UK pension age may rise to 68 in the 2030s: what’s going on? – Guardian [31]
Bear markets and identity crises – Young Money [32]
Why the French want to stop working at 60 – The Atlantic via MSN [33]
Study reveals cognitive dissonance about passive funds by active managers – TEBI [34]
Why we can’t stop changing our investment process – Behavioural Investment [35]
Who should pay on a date? Money, dating, and dealbreakers [Podcast] – Ramit Sethi [36]
Layoff brain – Culture Study [37]
Compound interest only spreads its wings at dusk – Simple Living in Somerset [38]
Musical investing mini-special
Should you be investing in stringed instruments? – Inside Hook [39]
“You’ll go a long way…” Music financing boom reverberates to markets [Search result] – FT [40]
Justin Bieber’s $200m sale to Blackstone-backed fund Hipgnosis – Billboard [41]
Naughty corner: Active antics
FTSE 250 CAPE valuation and forecast for 2023 – UK Dividend Investor [42]
After a timeout, back to the meat grinder [PDF] – GMO [43]
Hedge fund investing, turnover, and taxes – Albert Bridge Capital [44]
UK fallen angels: is it time to buy? [Video] – Vox Markets via YouTube [45]
Even software start-ups with long runways can’t grow into 2021 valuations – PitchBook [46]
(Don’t) buy back large cap growth just yet mini-special
Dotcom Redux – Verdad [47]
What are growth stocks? (Really?) – Finominal [48]
Alternatively: sticking with quality growth stocks – Quality Share Surfer [49]
Crypto o’ crypto
The price of Bitcoin – Fortunes & Frictions [50]
Wild West crypto firms fail FCA corruption checks – This Is Money [51]
Kindle book bargains
What Should I Do With My Life? by Po Bronson – £0.99 on Kindle [52]
The Investment Trusts Handbook 2023 by Jonathan Davis et al – Free on Kindle [53]
Stuffocation: Living More With Less by James Wallman – £0.99 on Kindle [54]
Factfulness: Ten Reasons…Why Things Are Better Than You Think by Hans Rosling – £0.99 on Kindle [55]
Environmental factors
How climate change threatens to close ski resorts – BBC [56]
UK pension schemes search for forestry investments [Search result] – FT [57]
Farmer, the world may not be your oyster – Hakai [58]
Off our beat
What the poet, playboy, and prophet of bubbles can still teach us [Search result] – FT [59]
Why success doesn’t lead to satisfaction – Harvard Business Review [60]
Remote work saved workers 72 minutes a day, study finds – Axios [61]
Six healthy lifestyle choices to slow memory decline named in ten-year study – Guardian [62]
Interesting stats on how much Japan has changed in recent years – Noapinion [63]
Bernie Madoff: the monster of Wall Street [Podcast] – A Long Time In Finance [64]
And finally…
“If you think your odds of solving your problem are bad, don’t rule out the possibility that what is really happening is that you are bad at estimating odds.”
– Scott Adams, How to Fail at Almost Everything and Still Win Big [65]
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