Posted Jul 23, 2022, 8:00 AM
France must prepare for the worst-case scenario, namely a total cut in Russian gas supplies. While this will have direct consequences for the companies which use this energy for their activities or for the households which use it to heat it, it could also destabilize the electricity market, since part of the European current is produced with gas power plants.
Also, the French government calls on companies and individuals to show “sobriety”. It also seeks to avoid consumption peaks, linked in particular to electric heating in winter. As the Minister for Ecological Transition Agnès Pannier-Runacher indicated at the start of the week, the French are invited to turn to “peak hours / off-peak hours” offers and suppliers to promote them.
1. What is a “peak hours/off-peak hours” offer?
Energy suppliers mainly offer two types of offers for household electricity supply. The “Basic” offer offers a single electricity price. Whether you turn on your iron at noon or midnight, the cost will be the same.
With the “peak hours/off-peak hours” offers, the price varies according to the hour. At times when the demand for electricity is high, mainly during the day, electricity is more expensive: 6% more than the regulated sales tariff (TRV), explains EDF, for offers indexed to this TRV. On the other hand, at times when demand is lower, mostly at night, electricity is cheaper: 15% below the TRV.
The objective of these offers is to smooth consumption. Since there are consumption peaks, especially at the end of the day when returning from the office, the “peak hours/off-peak hours” offers encourage consumers to move consumption that can be moved (washing machine and crockery, hot water tank, etc.) at times when consumption is lower. Please note that these times are fixed and vary by region.
2. What is the current state of the market?
Slightly less than half of French households currently have a “peak hours/off-peak hours” offer. According to the Energy Regulation Commission, for TRV contracts, there are 11 million “Base” contracts for 9.5 million “peak hours/off-peak hours” contracts. “These offers are very well known and many customers already subscribe to them”, explains Emmanuel Massa, Deputy Director of Markets at CRE. “But there are still customers who could switch,” he adds.
3. Are these offers really advantageous?
The economic interest of the offer for households depends on their electricity consumption. For example, a household that heats itself with electric radiators will tend to turn on its heating when returning from the office, that is to say at peak hours. The offer therefore does not seem advantageous to him.
According to a study of 60 million consumers carried out in 2020, the “peak hours/off-peak hours” offer is “almost never interesting for small electricity consumers”. Moreover, to be profitable, a household must focus more than half of its consumption on off-peak hours. However, the French average is 40% according to the association. “So that means that an ‘average’ customer loses,” she explains.
“Undoubtedly, the offer remains interesting for many”, underlines however Emmanuel Massa. “There are discussions underway to find out whether the price signal should be further strengthened to reach more customers. The CRE, like all the public authorities, is working on it,” he assures us. 60 million consumers pointed out in particular in 2020 that the price of off-peak hours was on the rise, which made offers less competitive.
To take stock of his personal situation, the consumer association refers to the energy ombudsman’s online calculator. It allows in a few clicks, depending on its consumption, to estimate the gains that can be made by switching from one offer to another. For its part, EDF ensures “to offer the ‘peak hours / off-peak hours’ offer whenever it is relevant”.
4. Do the “peak hours/off-peak hours” offers have a real impact on the demand for electricity?
According to Emmanuel Massa, these offers effectively make it possible to limit consumption peaks. “A good part of the relevance of the offer is based on the management of hot water tanks. They can be set to trigger only during off-peak hours and there is indeed an immediate rebound on the consumption curves at that time,” explains the specialist.
If these offers are old, they are even more relevant today, especially with the development of home automation. It has long been possible to set your washing machine or dishwasher to turn on at night. But it is also now possible to precisely control your connected electric heaters or even to postpone the moment when you recharge your battery-powered devices, which have become widespread in recent years. And thus achieve more savings.
Even more sophisticated offers to smooth peaks
As Emmanuel Massa points out, there are other electricity offers that aim to relieve the market when there is tension. This is particularly the case with the “Tempo” offers.
In addition to being based on an “off-peak/peak hours” model, these offers set a color code according to the day. Blue days – 300 days a year – are days of lower consumption, electricity is cheaper. The red days – 22 per year – are on the contrary days of tension: the price of kWh flies away.
Thus, for households that can postpone their consumption, this can allow real gains. For example, at EDF, the price for off-peak hours on blue days is 8.62 cents per kWh, compared to 54.86 cents for peak hours on red days.