When Octopus Energy tariffs shift thousands of homes out of peak, and the price drops for all participants, it doesn't matter that other suppliers can now sell more volume at a slightly lower price, marginally nudging the price back up. This is just how marginal pricing equilibria works.
The system still benefits from reduced peak demand, lower balancing costs, and more efficient dispatch.
Yes, a bit less windfall for Octopus but that’s precisely the point of a liberalised wholesale market: it internalises system savings in the price signal.
Consumers who don’t switch still pay less, because the entire system got cheaper to run (lower wholesale prices feed into lower fixed prices offered by suppliers).
Why would we complain that non-participants “steal” cheap electrons? If households want to save, they can sign up for time-of-use deals. If they don’t, they still benefit. That’s good public policy, not market failure.
Of course its easy to hand wave about evil suppliers working 'against the national interest'. Why don't we support the public monopoly mandating a total shifting on demand off of Sundays. We can all shift our demand to the other 6 days of the week and not pay anything on Sundays! That way we only have to pay for 6 days of electricity a week.
Once you start appealing to vague notions of the 'national interest', you can justify any absurd top-down directive. Why stop at Sunday? Maybe we should all boil kettles at 3 a.m. to support the grid. The problem with this line of argument is that it ignores both opportunity cost and diminishing marginal returns that prevent nonsense policies from being taken seriously in any real system.
The point of a market isn’t to oppose the national interest. It’s to reveal the cost of supplying electricity at any moment in time, based on actual scarcity and demand. If prices are high on Tuesday evening, that reflects something real, not sabotage by greedy suppliers. You can’t centrally plan demand away from expensive periods just because you wish it were cheaper. Mandating total demand shifts by fiat, rather than incentivising them through prices, destroys the very signals that tell us where and when flexibility is most valuable.
I don't begrudge the flexibility gained by Octopus, but the point is that on their own at least, they are not going to capture a large proportion of the savings. I explain why in the post. Indeed, whether you call it centralised command or what, NESO has incentivised the suppliers to reduce demand to capture the flexibility that on their own the suppliers could not - with the cooperation of suppliers who maybe did not stress the fact that the incentives for this were being paid through NESO. I think it is a pity that this sort of programme has to be caricatured into some sort of soviet style oppression about telling people when they boil their kettles. It is about the national system incentivising (note the word 'incentivising', not commanding) consumers to be more flexible than what can be achieved purely by the suppliers themselves. I am not convinced that this is going to be achieved under the current arrangements. It needs to be achieved, and ideology should not stand in the way of making this happen
I should note that NESO's efforts in the retail sector to incentivise flexibility have only been manifested by occasional demonstration programmes. They need to be extended into general practice
When Octopus Energy tariffs shift thousands of homes out of peak, and the price drops for all participants, it doesn't matter that other suppliers can now sell more volume at a slightly lower price, marginally nudging the price back up. This is just how marginal pricing equilibria works.
The system still benefits from reduced peak demand, lower balancing costs, and more efficient dispatch.
Yes, a bit less windfall for Octopus but that’s precisely the point of a liberalised wholesale market: it internalises system savings in the price signal.
Consumers who don’t switch still pay less, because the entire system got cheaper to run (lower wholesale prices feed into lower fixed prices offered by suppliers).
Why would we complain that non-participants “steal” cheap electrons? If households want to save, they can sign up for time-of-use deals. If they don’t, they still benefit. That’s good public policy, not market failure.
Of course its easy to hand wave about evil suppliers working 'against the national interest'. Why don't we support the public monopoly mandating a total shifting on demand off of Sundays. We can all shift our demand to the other 6 days of the week and not pay anything on Sundays! That way we only have to pay for 6 days of electricity a week.
Once you start appealing to vague notions of the 'national interest', you can justify any absurd top-down directive. Why stop at Sunday? Maybe we should all boil kettles at 3 a.m. to support the grid. The problem with this line of argument is that it ignores both opportunity cost and diminishing marginal returns that prevent nonsense policies from being taken seriously in any real system.
The point of a market isn’t to oppose the national interest. It’s to reveal the cost of supplying electricity at any moment in time, based on actual scarcity and demand. If prices are high on Tuesday evening, that reflects something real, not sabotage by greedy suppliers. You can’t centrally plan demand away from expensive periods just because you wish it were cheaper. Mandating total demand shifts by fiat, rather than incentivising them through prices, destroys the very signals that tell us where and when flexibility is most valuable.
I don't begrudge the flexibility gained by Octopus, but the point is that on their own at least, they are not going to capture a large proportion of the savings. I explain why in the post. Indeed, whether you call it centralised command or what, NESO has incentivised the suppliers to reduce demand to capture the flexibility that on their own the suppliers could not - with the cooperation of suppliers who maybe did not stress the fact that the incentives for this were being paid through NESO. I think it is a pity that this sort of programme has to be caricatured into some sort of soviet style oppression about telling people when they boil their kettles. It is about the national system incentivising (note the word 'incentivising', not commanding) consumers to be more flexible than what can be achieved purely by the suppliers themselves. I am not convinced that this is going to be achieved under the current arrangements. It needs to be achieved, and ideology should not stand in the way of making this happen
I should note that NESO's efforts in the retail sector to incentivise flexibility have only been manifested by occasional demonstration programmes. They need to be extended into general practice