Throughout most of the country, residential electricity customers pay the same price for electricity regardless of when it is consumed. Such flat rates mask the fact that true system costs vary over time according to electricity demand. Prices that better reflect the time-varying costs of producing and delivering electricity can lead to a number of economic and environmental gains, such as reduced wholesale prices, increased investment in clean distributed energy resources, and lower overall carbon emissions.
Time-variant electricity pricing gives customers greater control over their electricity bills, since they can use electricity when it is cheaper and cut back when it is more expensive. Time-variant pricing can also help utilities control costs and avoid large investments in infrastructure built to meet increasing peak demand. Finally, time-variant pricing can help reduce greenhouse gas emissions by incentivizing conservation and investments in distributed energy resources as well as shifting demand toward times when electricity is generated by cleaner sources.
The investments required to establish time-variant pricing can be significant. Existing systems must be upgraded to collect, store, manage, and integrate the much larger amount of data generated by this type of pricing. In the current regulatory environment, investing in the necessary meters, communications, and billing infrastructure requires new approaches and new strategies that utilities are only now beginning to investigate. It is crucial to note, however, that many of these investments entail upfront costs, while the benefits of implementing time-variant pricing accrue and potentially increase over time.
On March 31, 2015, Environmental Defense Fund is co-hosting a forum, “On the REV Agenda: the Role of Time-Variant Pricing” with the New York Department of Public Service and Institute for Policy Integrity at New York University School of Law to discuss how time-variant pricing can contribute to achieving the goals of New York’s “Reforming the Energy Vision” (REV) initiative, which seeks to create a cleaner, more efficient, and more affordable electricity system.
Wind mostly blows at night, when power demand is low. Thermal power plants (coal and nuclear) take a long time to start up, so even though demand is low they… Read more »
Time-variant pricing provides multiple benefits, both to the system and to electricity customers. Helping integrate renewables onto the system is a positive externality of the pricing system, but of course it… Read more »
Yes, along with other strategies like demand response, time-variant pricing is another step in allowing the grid to adjust more efficiently to demand and will help lead to more efficient… Read more »
“Time Variant Pricing” (TVP) could be a great market mechanism to integrate more intermittent renewables like wind and solar to achieve reliable, least-cost clean energy goals such as California’s 50% RPS (http://bit.ly/1CKCSdz)… Read more »
Customer education is a critical component to ensuring time-variant pricing is successful. Customers will need to understand what is being asked of them (in terms of rate impacts as well… Read more »
Your point is a very important one, especially given the choice structure of the rates. For opt-in rates, increasing customer outreach to maximize the number of customers that adopt the… Read more »
While time of use (TOU) pricing does not require advanced metering infrastructure, the adoption rate has remained low. This is partly because of lack of consumer knowledge about such pricing… Read more »
Dawn, I find myself in a most unusual place! I am in agreement with much of your posting. The customer, including manufacturers will not restrict their demand or actual use… Read more »
I’m not sure TVP in and of itself has a lot of effect on demand for renewables per se, although it can reduce the need for investments in generation capacity… Read more »
Great points Tim. Well-orchestrated TVP programs can help align energy demand with the growing penetration of customer-sited generation. For instance, TVP can motivate utilization of distributed energy resources during the… Read more »
Time variant pricing of course can be affected by “demand response”. Consumers can ‘choose” when to consume less and affect pricing presumably during high price periods. There are several problems… Read more »
First, I lived in a solar heated house in the 1970s that was equipped with a time-of-day electric meter. Adjusting behavior to minimize electric bills was not that difficult. Mainly,… Read more »
A range of insightful, valid, and accurate commentary on time-variant pricing is offered above. The contribution that the Location Emissions Estimation Methodology (LEEM) offers is a reasonably democratic and efficient access… Read more »
Beia, as you point out in your post, time variant pricing (TVP) gives consumers (some) control over their energy bills. While energy competition still has a long way to go… Read more »
You are much more optimistic than I. 1. Most people have more to do with their time. They will not voluntarily make the effort to understand power generation and grid… Read more »
I think it is important to understand that while not all customers will respond to time-variant pricing, there are many for whom TVP can help in managing their bills. Refusing… Read more »
That’s exactly right, Beia. It’s about innovation, Jack. TVP isn’t for everyone, but it can be one of the innovative answers. Some customers have significant reason to care about when… Read more »
Antonio, There is not much that is new or innovative re the concept of Time of Day Rates. It has been considered quite seriously since the 1970’s. The tools (metering)… Read more »
Antonio, In response to your previous posting. I have not been able to find any residential consumers who are interested in in the production of electric power; unless they are… Read more »
Many good points being made above. As some have pointed out convenience is for sure very important to residential customers and while we should not be overly optimistic about people’s… Read more »
My neighbor in Nova Scotia has time of day pricing and saves a lot of money. With financing help from Nova Scotia Power he bought a home thermal energy storage… Read more »
Dynamic pricing can be a win-win, for providers and consumers. The revenues for the providers and the surplus for the consumers (even if they are risk averse) can both be… Read more »
Nate Sandvig correctly points out that in order to more fully utilize renewable energy we will need much more energy storage capacity to help deal with the variability of renewable… Read more »
[…] diverse group of vetted expert commenters, moderated by Beia Spiller, Economist at EDF. To read the full discussion, please visit OurEnergyPolicy.org. […]
Time variant pricing monetizes electricity for what it’s worth at a particular time in the market. The approach drives electricity into “real time” value as we have for virtually every… Read more »