Octopus Energy claims it will pay you to use electricity - but beware the hype

The small energy firm, which has 160,000 customers, has today launched its new Agile tariff which will let you see when your electricity will be cheapest the following day, and may even pay you to use it if the wholesale price drops enough.

The renewable electricity tariff offers dynamic pricing based on the wholesale energy market, which is how much Octopus pays for electricity each day, meaning you can view when throughout the day your electricity will be at its cheapest - and most expensive.

To see if you can save £300+/yr by switching, use our free for a full market comparison.

How does it work?

The tariff works in a similar way to Economy 7 and 10 tariffs - where specific off peak periods have cheaper rates - however with Octopus the periods are not fixed and can change daily.

An Economy 7 tariff, for example, has a lower rate for electricity for a fixed seven hours a day, usually 12am to 7am. Conversely, the Agile tariff doesn't have set periods, instead you can check your online Octopus account from 4pm each day to see which time periods will be the cheapest for the following day - set out in 30 minute slots.

The idea is this allows you to adapt your energy consumption to match the best unit rates each day - but this takes effort. It's a complicated product so here are the key need-to-knows:

• It's an electricity only tariff. Octopus does offer separate gas tariffs or you could get your gas from a different supplier.

• There is a 35p/kWh maximum cap. If prices fluctuate, this is the highest price you would pay per unit of electricity you use - this compares to an average 9.57p/kWh on the market's cheapest tariff.

• If prices drop below 0p/kWh you will be paid for using electricity. If prices fall, Octopus will pay you a small amount for any electricity you use during that time.

• There is a 21p/day standing charge. This compares to 29p/day on the market's cheapest tariff.

• You must have a smart meter. Octopus will install one for you or replace your existing one if it is not compatible - but it's worth noting this is unlikely to be compatible with other suppliers if you switch (see our MSE 'Switchable' smart meters delayed News story) . If you're a new customer there's a waiting list.

• It's only available by going direct to Octopus. Due to the daily unit changes, it's unlikely to be available on any comparison site.

• There are no exit fees. You can switch away penalty-free at any time.

Will I really get paid to use electricity?

In theory, yes, but the reality is it may not happen very often at all.

If the unit prices of energy fall below 0p/kWh - which can happen if there is more electricity being generated than is being consumed - then Octopus will charge the negative rate - effectively paying you for the electricity used.

Over the last year though, this has only happened four times - for a combined total of two hours overnight. The lowest rate also hit a mere -0.3p/kWh, so in reality you're unlikely to pocket much at all. An average day's use based on the -0.3p/kWh rate means you'd be paid 2.5p.

Octopus will notify you via text, email or your online account if there is a negative rate period - what it calls 'plunge pricing' - at 4pm the day before.

How do I know if it's a good deal for me?

There is no way to predict how energy wholesale prices will change, so it's almost impossible to calculate how much the new tariff will cost over a year - meaning comparisons are difficult.

Octopus gave us the average unit rates for each 30 minute slot over the last 12 months (21 Feb 17 - 20 Feb 18) and we've compared this against the current cheapest Economy 7 tariff - the closest offering that has off peak pricing - to give an indication.

Annual electricity cost comparisons (1)

Based on typical use, the Economy 7 tariff is £8 a year cheaper, but as the Octopus tariff is variable and potentially has more hours of off peak pricing throughout the day, we still cannot categorically say how the tariff will stack up.

Overall, here are the things to consider:

• If you want fixed pricing for your electricity - steer clear of this tariff.

• If you use most of your electricity during peak hours (namely 4pm - 7pm) this is unlikely to be any good for you.

• To get the most out of it you need to consume the majority of your electricity outside the peak hours.

• If you're willing to be disciplined and check each day for the cheapest periods, it could be cost effective.

What does Octopus say?

Greg Jackson, founder of Octopus Energy, said: "This tariff is groundbreaking. By reflecting the real cost of energy on the grid every half hour, customers can capitalise on times when prices are especially low.

"Indeed, if the wholesale price goes below 0p/kWh, Octopus Agile will actually pay you to take the unwanted energy from the grid. As renewable energy production grows these events are only going to become more frequent."