Differential electricity pricing

Seagull in flight

Some forms of differential prices based on time are entirely artificial: for instance, telephone companies that charge more for calls made before 6:00pm or 7:00pm. They do this because it is profitable. It lets them charge high prices during the day to business users, while offering cheaper plans to social users later. That being said, there are situations where the economic basis for prices varies considerably depending on time of day (and year). Electricity production is one.

In the future, spikes in electricity demand may be partially mitigated through the combination of variable pricing and smart appliances that can inform users about the costs of operating at different times, or even make autonomous choices to stay within a budget. This video from General Electric provides more information.

While getting rid of daytime minutes would have little real effect on cell phone networks, shifting electricity demand from high-demand to low-demand times could have a significant impact on the electrical system, partly by reducing the need for inefficient ‘peaker’ plants, which top up supply during periods of maximum strain.

Author: Milan

In the spring of 2005, I graduated from the University of British Columbia with a degree in International Relations and a general focus in the area of environmental politics. In the fall of 2005, I began reading for an M.Phil in IR at Wadham College, Oxford. Outside school, I am very interested in photography, writing, and the outdoors. I am writing this blog to keep in touch with friends and family around the world, provide a more personal view of graduate student life in Oxford, and pass on some lessons I've learned here.

2 thoughts on “Differential electricity pricing”

  1. Electricity supply
    Profitable interruptions
    Collecting and trading spare electricity is a thriving industry

    SPIKES in demand for power and unexpected dips in supply have plagued electricity generators and their customers for decades. The solutions have been crude. More than a decade ago North American power companies started paying big consumers to switch off machines and devices to ease the load on creaking grids. In 2003 French producers did the same to cope with a heatwave.

    In some ways the problem has worsened. The rise in the use of renewable power, especially in Europe, has led to surges of supply on sunny and windy days and unpredictable lulls in conditions of cloud and calm. But that is a big opportunity for “demand-response” companies, which use computing power and clever algorithms to divert electricity from some consumers, such as factories or greenhouses, to users who need it more.

    Such services cope with spikes in consumption, which are mostly foreseeable (typically 18 hours in advance). Fluctuations in wind and cloud can cause gluts or shortages within minutes. The conventional way to offset this is through gas, hydro or modern coal-fuelled power stations, which can be switched on or off quickly. But getting consumers to change their habits a little is potentially much cheaper.

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