The challenges of moving to better electricity rate design

Electricity stakeholders have long debated what makes for good rate design. Bp gas prices akron ohio There is a persistent drumbeat from many corners for wider adoption of time-based rates, and more recently, proposals are popping up for incorporating demand charges for residential and small commercial customers. Austin electricity outage Numerous pilots have been run, and many utilities now offer customers the option of time-of-use or other alternative rates.

Unfortunately, many of these offerings are seriously flawed and, as a result, severely underperform against policy goals for system cost reduction, customer engagement, and environmental improvement. Electricity merit badge pamphlet Not helping matters, utilities, their regulators, and other stakeholders often talk past each other in rate design discussions, using different language and frequently approaching the issue with starkly different motivations.

RMI has released a new report, A Review of Alternative Rate Designs, to help address these challenges. Gaz 67 for sale The report provides a meta-analysis of numerous rate design programs and pilot studies, as well as dozens of reports and expert analyses conducted in recent years, to identify the key design dimensions of time-based and demand charge rates for mass-market customers. Gas delivery We cut through the noise and competing claims of what works and what does not in order to support more constructive rate design dialogue across the industry. Electricity khan academy And where there is simply not enough evidence to support definitive conclusions, we identify the gaps where future research is needed. A level physics electricity notes What makes alternative rate designs work?

To structure our review, we identify the key dimensions for each rate type—nine dimensions for time-based rates and eight for demand charges—then evaluate available research against those. Electricity vocabulary Based on the identified dimensions, and measured against key objectives, including peak reduction, total energy consumption, and customer acceptance, we find impacts ranging from negligible to significant, as well as many cases where a lack of empirical results makes definitive conclusions difficult to reach. Gas engine tom Although the results may be mixed, this is for a reason: our research points to the criticality of specific design choices to make rates meet objectives. Gas giants By designing rates according to our identified dimensions, utilities, regulators, and the industry can go a long way toward doing rate design better. Gas national average 2013 Time-Based Rates: Lots of Opportunity, but Design Is Key

Utilities have experimented with time-based rates for mass-market customers for decades, and the results are in: time-based rates can be very effective when designed well. Nyc electricity consumption Our review found clear evidence that these rates can lead customers to reduce their peak consumption without sacrificing customer enrollment or retention, and may also lead customers to consume less energy overall.

There are many approaches to time-based rates, but all share one essential characteristic: their prices vary by time of day to more accurately reflect costs. Gas engineer salary But how often do those prices change, what is the difference between base and peak prices, and how much notice does the customer have? These fundamental design decisions are determined in part by a rate’s base structure, and by any modification options that are used.

Although many might view RTP as something of a holy grail, it is largely regarded as impractical for most customers in the near future. Electricity billy elliot Instead, flat and TOU base structures can be modified to achieve some of the dynamism of RTP by sending targeted price signals when grid costs are especially high. Gas number density Modification options include:

• Critical peak (CP) mechanisms that apply a predetermined price to a limited number of days each year, where events are finalized a few hours to a day in advance;

• Variable peak (VP) mechanisms that use a predetermined peak period but can vary the peak price, for example according to wholesale prices or reliability needs; and

• Flexible duration (FD) mechanisms, where peak periods are not predetermined, allowing a closer match between the actual timing of peak system costs and the signal sent to customers.

Whether a rate will be effective in achieving desired outcomes depends on more-nuanced design decisions along several critical dimensions. E payment electricity bill bangalore These include, in particular, structural decisions for the ratio of peak to off-peak prices (or POPP ratio) and the length and frequency of on-peak periods, as well as implementation choices, including whether the rate is opt-in or opt-out, and what enabling technology is available to automate customers’ response. Electricity worksheets high school These choices are key to determining whether the rate accurately reflects time-varying system costs, and whether the rate will be acted upon.

Despite their importance, designers of time-based rates have overlooked many of these choices. Wd gaster theory For example, you don’t have to look very hard to find TOU rates where the on-peak period lasts more than half the day. Gas 93 A choice like this may make sense on paper from a cost recovery standpoint, but the resulting rate is practically unusable for most customers. Gas variables pogil key Demand Charges: Better Understanding of Impacts Is Needed

Demand charge rates are another hot topic in the utility industry. Gasco abu dhabi They can provide a mechanism to directly recover marginal costs associated with peak load on the grid, and provide a signal to customers that reducing their demand is economically efficient. Arkansas gas prices However, while the opportunities for demand charges are interesting, our review finds that there is comparatively little industry experience with them relative to time-based rates. Gas 10 ethanol Consequently, there is also less empirical evidence available to understand the efficacy of demand charges on key objectives.

While claims about the impact on outcomes remain speculative, the demand charge debate still offers insight into which design choices will be meaningful to make a rate effective. 1 unit electricity cost in kerala First and foremost is the extent of the demand charge—does it include most costs or only a few? At one end of the spectrum, “narrow” demand charges include only costs for things that are sized to meet a customer’s individual peak demand, such as the line transformer serving their building. Electricity transmission “Broad” demand charges expand to include other capacity-related distribution costs, whereas “extensive” demand charges go further to include all infrastructure built to meet peak demand.

* In some situations, a portion of advanced metering infrastructure (and other smart-grid infrastructure) costs may be appropriately recovered through energy or demand charges. Electricity grid code Source: A Review of Alternative Rate Designs

As with time-based rates, more-nuanced design choices are very important. Electricity magnetism and electromagnetism In particular, whether charges are for customer load that is coincident with peak will determine whether or not the rate sends accurate price signals about system costs. Gas works park address Meanwhile, other structural choices likely influence whether customers can respond to the rate—specifically, the length of the period over which peak demand is measured, how frequently it’s measured, and whether the charge ratchets up based on past demand. Electricity vancouver wa It is also essential to design demand charges that are actionable by customers. Extra strength gas x while pregnant At a minimum, demand charges should be communicated to customers in a straightforward manner and send a price signal that they can reasonably respond to—if customers can’t actually respond, the demand charge is effectively a fixed charge.

But before advocating for wider adoption, the industry needs to acknowledge what is known and unknown on demand charges, and where further research will be most useful. 9game Our report attempts to make progress toward those ends. J gastrointest oncol impact factor Utilities and regulators can move forward with improved rates

Rate design is evolving, and the rates reviewed in this report are incremental steps toward more sophisticated, full-value price signals on the grid. Electricity and magnetism lecture notes Moving forward, new approaches are needed to achieve better pricing that reflects system costs and fulfills societal needs. Electricity labs high school This includes developing new rate options with greater temporal, locational, and attribute-based granularity, as well as improved compensation mechanisms that recognize the value provided by customer-sited technology, including distributed generation.

Still, it is important to understand the design choices involved in alternative rates being offered today. Electricity in indian villages To that end, our report is instructive. Gasco abu dhabi location First, more effective time-based rates can be developed, building on the wealth of industry experience summarized in our report, and can be widely deployed through new default rates or improved opt-in programs. Gas quality On the other hand, before wider rollout of demand charges can be considered, a better understanding of their impacts is needed. Gas tax oregon That experience can be gained using demonstration and evaluation projects using robust experimental designs.

Rate designers and regulators can use this new report to help structure their work in order to more clearly and consciously address the range of outcomes that electricity rates need to achieve. Frictional electricity examples Similarly, we hope that the report supports the broader electricity industry in having a more honest conversation about rate design, and spurs new ideas about how to manage the tension between maintaining a minimally complex customer experience and continuing to increase rate sophistication.