Integrating Dynamic Pricing with Inclining Block Rates · 2018-02-02 · Dynamic pricing could be...
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Integrating Dynamic Pricing with Inclining Block Rates
Presented byRyan Hledik
Stanford Energy & Feedback WorkshopHewlett Foundation
Menlo Park, CA
September 5, 2008
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2Stanford Energy and Feedback Workshop
Intelligent rate design promotes more efficient electricity consumption
Dynamic pricing• Revolutionizing today’s electricity rates• Pricing pilots are being conducted around the country• Costs of enabling technologies are rapidly falling• States are adopting policies to promote the new rates
Inclining block rates• Do not require new technology• Focus on conservation• Complement dynamic rates
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3Stanford Energy and Feedback Workshop
What is dynamic pricing?
Dynamic pricing refers to the family of rates that:
• Vary by time of day• Are “dispatchable”• Focus on reducing peak
demand• More accurately convey
the true cost of providing electricity
Illustration of Residential CPP Rate
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Hour of Day
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/kW
h)
Existing All-InCPP on Critical DaysCPP on Non-Critical Days
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4Stanford Energy and Feedback Workshop
Several new dynamic pricing experiments have been conducted across North America since 2000
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5Stanford Energy and Feedback Workshop
The pilots have shown that customers do respond to dynamic pricing
Non-Technology Enabled Impacts of Pricing Pilots
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k D
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6Stanford Energy and Feedback Workshop
Enabling technologies facilitate even greater demand response
Role of Technology on Pilot Program Impacts
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PSE&G (TOU) PSE&G (CPP) CA SPP (CPP) AmerenUE-2004(CPP)
AmerenUE-2005(CPP)
Pilot Program
% R
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7Stanford Energy and Feedback Workshop
The potential benefits of dynamic pricing and demand response are significant
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Dynamic PricingStandard
PCT Standard
Automated DRStandard
TotalBenefit
Pres
ent V
alue
of I
ncre
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enef
it ($
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ions
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$1.4 Billion,2.5% Reduction
$4.2 Billion,7.4% Reduction
$1.5 Billion,2.7% Reduction
$1.3 Billion,2.4% Reduction
$8.5 Billion,15% Reduction
With
Sta
ndar
ds
These benefits are driven primarily by avoided investment in newgenerating capacity through peak demand reductions
The Potential Impact of Load Management Standards in California
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8Stanford Energy and Feedback Workshop
The conservation impacts of dynamic pricing are unclear
• Some pricing pilots have suggested moderate conservation impacts
• The California Statewide Pricing Pilot did not find a significant conservation effect
• Long-run conservation effects have not yet been tested
If conservation is the dominant policy objective, inclining block rates are an attractive complementary option…
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9Stanford Energy and Feedback Workshop
Dynamic pricing could be complemented by inclining block rates
Illustration of Inclining Block Rate
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Monthly Consumption (kWh/Month)
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ts/k
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Size of Average Customer
Existing Flat Rate
Inclining Block Rate
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10Stanford Energy and Feedback Workshop
Energy use and customer bills could decrease significantly in response to inclining block rates
Average short run impacts suggested by our simulations:• Consumption reduction ranges from 1% to 6%• Bill savings range from 1% to 9%
Simulated Distribution of Bill Impacts
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11Stanford Energy and Feedback Workshop
The way forward is to offer customers a menu of rate options
Risk (Variance in
Price)
Reward (Discount from Flat
Rate)
10%
5%
10.5Flat Rate
RTP
CPP
VPP
Inverted Tier Rate
Seasonal Rate
TOU
More Risk Averse Customers
Less Risk Averse Customers