With the rise of a number of industry challenges — such as distributed generation, flattening electricity demand, new regulations, aging grid infrastructure, and low levels of customer engagement — things can certainly seem bleak for utilities.
However, a new in-depth study discusses a solution that may offer an important opportunity for utilities to more effectively navigate some of these trends: dynamic pricing rates. The report from Rocky Mountain Institute – Rate Design for the Distribution Edge: Electricity Pricing for a Distributed Resource Future — explores how utilities can increase rate sophistication and, in turn, address a number of their pressing business challenges.
Traditionally, utility energy bills have not adequately reflected variables like time of day, peak demand conditions, or other factors that have important implications for grid management. By beginning to account for some of these variables with the help of dynamic pricing rates (e.g. electricity prices that correspond to different grid conditions), utilities can start to make headway in areas such as managing peak demand and giving customers more energy management options.
The graphic below from the Rocky Mountain Institute displays the conceptual difference between standard pricing (“flat volumetric retail”) and examples of dynamic pricing regimes.