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.