Dynamic Pricing to Go mainstream

April 23, 2009 at 8:00 am

For years, even decades, utilities have run pilots of dynamic prices; Stimulus Bill funds are now making them mainstream.

Dynamic prices vary by time of day and reveal to consumers the true cost of peak and off-peak power. The flavors include time-of-use (peak and off-peak prices every day), critical peak (a flat price with a high-priced hammer for a few hours 10-15 days per year), peak time rebate (a flat price with an attractive rebate for reductions during the same critical peak hours), and hourly pricing (prices that change every hour and are posted a day ahead so consumers know about them). In the pilots, 80 to 90 percent of customers like dynamic prices, and they respond by reducing peak demand by 10 to 40 percent (the higher reductions come from automatic thermostat control).

The Department of Energy published draft rules for $3.3 billion of smart grid grants to be given to utilities and others over the next 18 months. Significantly, grant applications are expected to include dynamic pricing options for consumers. With an estimated 200 to 300 grants to be awarded, there will be that many utilities moving forward with dynamic pricing for at least some customers.

Dynamic pricing’s time has come.

– Chris King

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