Together with Motivaction, a market research and advice agency, CE Delft has conducted research into the opportunities and challenges of dynamic electricity contracts for consumers. This involved technical analyses, calculating the energy costs of many different types of consumers and conducting surveys among 1,750 consumers. We recommend two specific policy measures:
Consumers often know very little about their own electricity consumption and electricity contracts. This study indicates that dynamic energy contracts are more favourably priced than fixed and variable electricity contracts, making them cheaper for households without any change in behaviour. During years when prices rise suddenly, a dynamic electricity contract may sometimes result in higher electricity costs. Electricity bills can be reduced further by shifting electricity consumption to cheaper times of day, possibly using smart software. The price advantage is greatest for households with an electric car or heat pump, making dynamic electricity contracts more attractive to a large number of households.
We advise market parties to continue improving the provision of information regarding dynamic electricity contracts; the government can develop guidelines for this purpose. These guidelines may be clarified and monitored by the Netherlands Authority for Consumers & Markets (ACM) based on energy legislation requirements. We recommend that this information includes at least the following: a financial comparison between the various electricity contracts, including the effect of switching electricity demand to cheaper times, the price certainty and uncertainty of the various contract types, advice on the minimum size of a financial buffer, and an explanation of how the various contract types work in general.
Dynamic electricity contracts will have a congestion-neutral effect in some districts: there will be no or only a limited change in peak load on the grid. However, in half of the districts surveyed in this study, in 2030 peak loads will increase by an estimated five hours per year due to the shifting of electricity demand based on dynamic electricity contracts. In two-thirds of the districts surveyed, in 2040 we anticipate an increase during peak periods of up to 25% and a maximum of 30 hours per year. For grid operators, the peak load trend outlined for 2030 and 2040 indicates a significant increase in the risk of overload, especially in districts where grid utilisation is currently already at capacity.
This calls for specific and coordinated measures, which are currently being developed by many stakeholders through various channels. We advise network operators to investigate the following potential solutions for network congestion: reducing the capacity of flexible devices during congested periods through contracts with market parties (with the consent of individual consumers), supplemented by a technical safety net (grid protection) for critical periods when contracts are inadequate. Any further increase in dynamic electricity contracts must go hand in hand with these measures. Based on this study, we see no immediate reason to limit the roll-out of dynamic electricity contracts.