Not So Dynamic Future for Utility Dynamic Pricing Rate Plans

Oct. 10, 2013
Does your business model rely on dynamic pricing for households? Uh oh.

Photo Credit. Richard Masoner / Cyclelicious

Behavioral psychologists say that we are more apt to show concern about energy – and use it prudently – if we receive regular visual clues about its cost.

Think about  how Americans latch on to news about oil markets.  This isn’t surprising, given the proliferation of road-side signs that constantly remind us what  gasoline costs. With electricity, it’s the opposite. The immediate price is invisible to us, so we consume blindly.

That’s why it is sobering to read the recent report by Navigant Research showing how slowly US households are adopting dynamic pricing rate plans.

Dynamic (time-of-use) pricing helps consumers tune into the actual cost of electricity as it changes throughout the day. The idea is to encourage use of  appliances when energy is cheap and plentiful, not when it is expensive because the grid is under strain.

The percentage of U.S. customers that have access to dynamic rates will increase from less than 3 percent in 2013 to about 14 percent  by 2020, according to Navigant’s base case forecast. But unless something changes, not even one percent of households will use the plans by 2020 because of consumer resistance and regulatory and economic barriers, says the report.

This is troublesome news given that the effectiveness of smart homes and smart grid often relies on accurate price signals.

Can we speed things up, please?

More from Navigant here.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is an award-winning writer and editor who specializes in the energy industry. She is chief editor and co-founder of Microgrid Knowledge and serves as co-host of the publication’s popular conference series. She also co-founded RealEnergyWriters.com, where she continues to lead a team of energy writers who produce content for energy companies and advocacy organizations.

She has been writing about energy for more than two decades and is published widely. Her work can be found in prominent energy business journals as well as mainstream publications. She has been quoted by NPR, the Wall Street Journal and other notable media outlets.

“For an especially readable voice in the industry, the most consistent interpreter across these years has been the energy journalist Elisa Wood, whose Microgrid Knowledge (and conference) has aggregated more stories better than any other feed of its time,” wrote Malcolm McCullough, in the book, Downtime on the Microgrid, published by MIT Press in 2020.

Twitter: @ElisaWood

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