Smart Grids: An Approach to Dynamic Pricing in India
The report also considers the Advanced Metering Infrastructure (AMI) system, which is a promising option for many developing countries to help reach 100 percent metering of loads. To do this, the report authors recommend a cost-benefit analysis (CBA). If the CBA doesn’t show an overall benefit for full-scale implementation, it is not recommended to move forward. The report recommends beginning with a smaller-size pilot project within a similar market to the larger-scale rollout.
Dynamic pricing options include time of use (TOU), critical peak pricing (CPP), critical peak rebate (CPR), real time pricing (RTP), and variable peak pricing (VPP), which all rely for its success in customer engagement combined with pricing options, enabling technology, and market segment.
Excerpt from the report:
Section 1252 of EPAct, smart metering, covers these federal standards and defines the following time-based pricing methods:
- Time of use (TOU) pricing: Under TOU pricing, the electricity prices are rates set for specific hourly time periods on an advance or forward basis. Prices paid for energy consumed during these periods are pre-established and known to consumers in advance, thus allowing them to vary their usage in response to these prices and manage their energy costs by shifting usage to a lower cost period or reducing their consumption overall.
- Critical peak pricing (CPP): TOU prices are in effect except for certain critical peak days when prices may reflect the exceptionally high costs of generating and/or purchasing electricity at the wholesale level.
- Real time pricing (RTP): Electricity prices may change hourly, or even sub-hourly, with price signals provided to the user shortly in advance, reflecting the utility's cost of generating and/or purchasing electricity at the wholesale level.
- Peak load reduction credits: For consumers with large loads who enter into pre-established peak load reduction agreements that reduce a utility's planned capacity obligations.