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In 2022 and 2023, the Electricity System Operator of Great Britain introduced the first-ever country level Demand Flexibility Service, a program aimed at encouraging utilities and the general population to curtail energy demand during peak times. The DFS auctioned off MWh reductions to the grid. Octopus Energy, a utility, was the largest participant in this service, implementing the initiative under the title ‘Saving Sessions’. This comprised 13 individual demand response sessions offered to 1.4 million Octopus Energy customers, with incentives awarded for reducing energy consumption.
Centre for Net Zero (CNZ), an impact-driven research unit, conducted research into how Octopus Energy customers responded to these flexibility events. As part of the Octopus Energy Group, CNZ has access to its large and valuable customer dataset, providing a unique insight into energy behaviours. We operate autonomously and set our own research agenda.
Utilising comprehensive consumer data and employing various identification methods, we estimated the impact of this nationwide program on energy demand and economic welfare.
Additionally, we conducted a natural field experiment involving different advance notice periods and incentives provided to customers for their participation in a Saving Session. We found: (i) the Saving Sessions resulted in a 10% reduction in energy demand associated with being invited to participate and, based on an estimated local average treatment effect, a 40% reduction from those actively opting in to Sessions (where individuals manually made adjustments within their homes to change demand); (ii) shorter advance notice periods for signed up customers dampened the demand response from these households by 25%, according to our preferred model specifications; and (iii) the Saving Sessions demonstrated a marginal value of public funds between 1.05 and 2.6, depending on when the grid is approaching a blackout, indicating that the program yielded positive benefits relative to the costs involved.