What sounds like some cheap advice from a self-proclaimed YouTube investment coach and may drive you to gamble away all your savings is actually a pretty solid piece of advice when it comes to home energy management. Because, unlike stocks, retail electricity prices (in the short term at least) are quite predictable, and mostly provided a day ahead. And this knowledge allows consumers to make some risk-free and effortless returns – provided they have a smart energy management system (EMS).
If you followed the news over the last 12 months you will have heard a lot about volatile and rising electricity prices. And yes, the average wholesale price of a Megawatt hour in Germany increased from 168€ in January 2022 to 469€ in August and then dropped again to 102€ in March 2023. But that’s only half the story. The other half – the volatility – hides behind the average. If we take a closer look at electricity prices, we see that there is a pattern on most days – also known as the duck curve. We have high prices in the morning hours, low prices during noon when solar production is high, a return to high prices in the evening and low prices again during night time. On average, the difference between the peak and the lowest price on any given day was more than 200€/MWh (20ct/kWh) in Germany in 2022.
Average intraday electricity price spread across Europe
Translating wholesale to retail electricity prices
But retail electricity prices are a bit more complex than wholesale prices – taxes, levies, grid fees and so on distort the price. Luckily, some forward thinking energy providers are transparent on the prices they offer. And so it is a simple task for anyone with high school math and an affinity for spreadsheets to derive the function that translates wholesale to retail prices. When we crunched the numbers (May 2023), we got the following result:
Retail Price (ct/kWh) = Wholesale Price (€/MWh) / 10 + 12
Or in non-math terms: take the wholesale price given in euros per MWh, convert that to cents per kWh (i.e. divide by 10) and add 12 cents to it.
Cheap at night. Cheap at noon.
Average retail electricity price in Germany
By applying the formula to wholesale prices in Germany throughout 2022, we see that electricity is cheapest at night (00:00 - 06:00) and noon (13:00 - 16:00). Prices are then most expensive in the morning hours, with a peak at 08:00 and in the evening at 19:00.
How a commuter could benefit from that
Let’s look at an average commuter and how they would benefit from dynamic prices paired with smart energy management. First of all, the average commuter in Germany travels 17km one-way, or 34 km/day. Assuming a power consumption of 15 kWh/100 km and that equates to 5.1 kWh/day.
Without energy management the charge pattern would most likely look like this:
- Arrive at work at 8:30 – charge 2.55 kWh at 41.24 ct/kWh. That’s €1.05.
- Arrive at home at 18:30 – charge 2.55 kWh at 40.75 ct/kWh. Another €1.04.
That adds up to a total of €2.09 for electricity per day.
With energy management, charging is delayed until electricity is cheap so:
- Arrive at work at 8:30, start charging at 14:00 – charge 2.55 kWh at 30.65 ct/kWh. €0.78.
- Arrive at home at 18:30, start charging at 04:00 – charge 2.55 kWh at 30.81 ct/kWh. €0.79
This adds up to a total of €1.57 for electricity per day. So without altering their charging behavior in any way, our EV driver could automatically save 25% on their charging bill with a smart EMS.
Going beyond charging
Charging is just one example of how consumers can take advantage of dynamic electricity prices. Further examples include:
- More large flexible consumers: Heat pumps are currently experiencing a boost in popularity. Even averagely insulated houses can maintain in-room temperatures for several hours, meaning heat pump operation can be shifted to off-peak hours.
- Hedge against high power prices: If regulation allowed it, consumers could also use their batteries to hedge against high power prices by charging during low price periods and using the battery to power their home during high price periods.
- Arbitrage: Consumers could charge their batteries during low price periods and sell back to the grid when prices are high (only viable with large price spreads) or consumers could shift grid feed-in from their PV system to high price periods.
Life is too short to worry about electricity costs. Let an energy management system do it for you.
It’s a win-win-win
Our Account Executive, Marlon von Coburg, firmly believes that with the right solution EV charging shouldn't add challenges but actually unlock many benefits. "Life is too short to worry about electricity costs. Let an energy management system do it for you – and at the same time support the grid and the planet," he says. Here are the benefits of smart charging with an EMS:
- Financial savings: The most obvious win when shifting consumption to low price periods – you will pay less.
- Carbon reduction: Low price periods usually coincide with a high share of renewables in the electricity mix. Encouraging consumption during low-carbon non-peak hours therefore lowers emissions.
- Grid stability: Consumers are incentivized to shift their loads to times of lower demand, thereby reducing the need for grid upgrades.
So as stated in the beginning, what sounds like some lousy investment advice might be a valuable puzzle piece for the energy transition, aligning incentives, reducing carbon emissions and cutting costs.