New IEE Whitepaper on Advancing Nationwide Deployment of Dynamic Pricing of Electricity
June 30, 2009 - The Institute for Electric Efficiency (IEE) just released its study of dynamic pricing programs from across the U.S. and advocates increased deployment of dynamic pricing of electricity nationwide.
The study, Moving Toward Utility-Scale Deployment of Dynamic Pricing in Mass Markets, finds that the cost to serve a customer on a dynamic price is lower than the cost to serve a customer on a fixed rate, and that widespread dynamic pricing to mass market customers has the potential to provide substantial benefits for energy providers and electricity customers, as a result of shifting peak demand.
The study also analyzes the current status of advanced metering infrastructure (AMI) deployment, proposals, and plans nationwide and makes recommendations for overcoming barriers to increased use of dynamic pricing. By opening markets and allowing mass market customers to experience different types of rate or pricing options, such as critical peak pricing and peak time rebates, dynamic pricing actively engages electricity customers in demand response and energy management. The study is being distributed to electric utility industry executives, policy makers, and stakeholder groups across the nation.
“This study summarizes existing data on customer participation and outcomes from dynamic pricing programs to date,” said IEE Executive Director Lisa Wood. “We’ve known that dynamic pricing could provide significant benefits for peak demand reduction for some time but, coupled with the plans for deployment of 'smart meters' to mass market customers in many states in the U.S., the case for deployment of dynamic pricing in mass markets becomes much stronger. The recent FERC study on the potential for demand response in the U.S. confirms the importance of shifting load from peak to off-peak periods. This information should assist utilities and regulators who are assessing the business case for AMI.”
To develop the case for dynamic pricing, the paper examines five dynamic pricing pilots/programs that have been implemented in the U.S. – California’s Statewide Pricing Pilot (2003-2004), Baltimore Gas and Electric’s Smart Energy Pricing Pilot (2008), Commonwealth Edison’s Energy Smart Pricing Plan (full-scale roll-out), Public Service Electric and Gas’s MyPower Pricing Pilot (2007), and Pacific Gas and Electric’s SmartRate Program (full-scale roll-out). Carefully reviewing the evidence from these five programs, the study finds that customers respond to dynamic prices in significant and predictable ways. In particular, customers that have an enabling technology (such as a programmable communicating thermostat) respond by shifting more load to off-peak periods than those without an enabling technology.
The study was prepared jointly by The Brattle Group and the Institute for Electric Efficiency and is available to the public on the IEE website: www.edisonfoundation.net/iee. The Institute for Electric Efficiency was launched in 2008 to advance energy efficiency and demand response among electric utilities and is a program of the Edison Foundation.
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