The sun rises over frost-covered houses in December 2022 in London, England. Cold weather has returned in January, causing the U.K. power supplier to offer financial incentives for households to cut use at peak times.

Leon Neal | Getty Images News | Getty Images

LONDON — More than a million British households and businesses are being offered cash incentives to cut their energy consumption during peak times, with supply margins expected to tighten more than usual as temperatures drop below freezing.

On Monday, three out of five back-up coal power stations were told to fire up to provide back-up supply, although the measure was reversed early Tuesday.

National Grid ESO, which has overall responsibility for managing Britain’s electricity supply, said the public should not worry about blackouts. The steps were “precautionary measures to maintain the buffer of spare capacity we need,” it said.

The cold weather has combined with a drop in wind power — a key energy source for Britain — which frequently generates more than half of the country’s electricity. Over the weekend and into this week, the wind power share has dropped below a quarter, with gas taking over as the primary source.

Coal frequently supplies under 2% of this energy mix. In the summer of 2020, Britain marked a record 67 days and 23 hours without using coal. The government has set an October 2024 target to eliminate coal from electricity generation.

The energy saving scheme ran from 5pm to 6pm Monday and will be active again on Tuesday between 4:30pm and 6pm. It sees households that have signed up to National Grid ESO’s Demand Flexibility Service get discounts on their bills for cutting their electricity use during peak time.

To qualify, consumers must be on a smart meter and customers of one of 27 registered suppliers, which include British Gas, EDF and Drax. This is the first full roll-out of the scheme, which was previously tested on a small scale.

Supplier Octopus Energy said that participating customers would earn £4 worth of points for every unit of power saved, which can be converted into cash. The company expected the average household to save around £36 through the winter.

This is then covered by National Grid ESO, which on Monday said it paid suppliers between £3 and £6 per kilowatt hour of energy saved.

National Grid ESO was legally separated from listed utility firm National Grid in 2019. Lawmakers are in the process of attempting to fully nationalize it, in order to appoint an independent body to oversee the green transition.

Lauren Broadfield, European gas analyst at research consultancy Energy Aspects, told CNBC this week’s measures were not a cause for concern.

“It’s not unusual for system operators to take steps to ensure a sufficient margin between expected supply and demand,” she said by email, noting the combination of colder-than-average weather and low wind speeds were causing higher demand and lower supply.

“National Grid early this morning cancelled its previous instruction for three coal units to start up as margins should once again be sufficient this evening,” she added.

British households are being given government support to help with sharply higher energy costs this winter, providing a £400 discount to all households on their energy bills spread across the period between October 2022 and March 2023.

The government is also compensating suppliers in order to cap the maximum amount they can charge households. The length of the scheme was scaled back by Finance Minister Jeremy Hunt in the autumn, bringing the amount that the average household is expected to pay over a year up from £2,500 to £3,000 in April.