What is Economy 7?
Economy 7 is a type of electricity tariff which charges a lower rate for the electricity you use at night (usually the seven hours from midnight to 7.00am, although this can vary) compared to the rate you pay for the rest of the day.
This concept was first introduced in the 1980s, when energy suppliers wanted to encourage households to use their energy at night rather than the day, in order to reduce peak-time use and take pressure off the electricity networks. Energy companies could then offer a lower price for energy use at those times of the day when there was lower demand.
Who does it benefit?
People who work unusual hours often benefit from the lower night-time rates, as do those who use storage heaters, which allow thermal energy to be stored overnight and releases this as heating during the next day as needed. Those with a hot water tank could also benefit from this type of tariff if it can be turned to an off-peak setting.
However, it's important to point out that this type of tariff will not save everyone money. Even though you pay less for the electricity during the night, the cost during the day is higher.
It can therefore be costly for those who don't wish to spend a lot of time planning on when they will use their appliances. If you opt for this tariff but you're the type of person who may want to spontaneously pop on the heating on a particularly cold evening, you'll end up receiving very expensive bills for daytime rates.
Comparison to a normal tariff
Economy 7 tariffs are electricity-only. The day time rate for the Economy 7 tariff is typically between 13p and 17p per unit used (in KWHs), with the cheaper night time rate costing between 7p and 10p per unit (in KWHs). The standard rate of a non-Economy 7 tariff is usually between 12p and 17p per unit per KWH. This means that an average user on an Economy 7 tariff could save around £114 a year, if they could commit to using 55% of their energy at night. It is also worth noting that sometimes the Economy 7 meter installation fee is £50, although some suppliers will do this for free.
The general rule is that Economy 7 will only really be beneficial to those who use 40% or more of their electricity at non-peak time hours, and for those who have a storage heater, and/or a hot water tank.
Here at GB Energy Supply we offer both a variable and fixed day/night tariff. The fixed tariff means that you are protected against price rises during your 12 month fixed term, however it can also be more expensive than the variable tariff because energy prices might go down as well as up.