dynamic pricing potential and issues n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Dynamic Pricing - Potential and Issues PowerPoint Presentation
Download Presentation
Dynamic Pricing - Potential and Issues

Loading in 2 Seconds...

play fullscreen
1 / 19

Dynamic Pricing - Potential and Issues - PowerPoint PPT Presentation


  • 141 Views
  • Uploaded on

Dynamic Pricing - Potential and Issues . Joe Wharton and Ahmad Faruqui Kansas Corporation Commission Workshop on Energy Efficiency March 25, 2008. Policy of Dynamic Pricing raises important questions. What is the potential impact of dynamic pricing on peak demand?

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Dynamic Pricing - Potential and Issues' - merv


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
dynamic pricing potential and issues

Dynamic Pricing - Potential and Issues

Joe Wharton and Ahmad Faruqui

Kansas Corporation Commission Workshop on

Energy Efficiency

March 25, 2008

policy of dynamic pricing raises important questions
Policy of Dynamic Pricing raises important questions
  • What is the potential impact of dynamic pricing on peak demand?
  • What is the value of this demand response (DR)?
  • How much does customer price responsiveness vary by customer and region?
  • How can rate design make dynamic pricing more attractive to customers?
slide3
Dynamic pricing can lower system peak demand by 5 percent, considerably below the economic and technical potential
slide4
A 5 percent reduction in US peak demand could be worth $31 billion over a 20-year period, just on avoided costs
  • Assumptions
    • 5% demand reduction in 757 GW
    • $52/kW-year capacity price
    • 20 year horizon
    • 15% discount rate
    • 2% peak growth rate
    • Avoided cost of energy is 36% of avoided cost of capacity*
    • Value of wholesale price reduction is 278% of avoided cost of capacity*
  • *Derived from a study on the value of DR in PJM:
  • The Brattle Group, 2007, Quantifying Demand Response Benefits in PJM, Prepared for PJM and MADRI

NPV of Avoided Costs = $31 billion

slide10

Different Critical Peak Pricing (CPP) tariffs induce different load impacts during “event days”

mass market customers response varies by enabling technologies and the customers end uses
Mass Market customers’ response varies by enabling technologies and the customers’ end uses
a discount could be build in for the insurance or risk premium incorporated in flat or hedged rates
A discount could be build-in for the “insurance or risk premium” incorporated in flat or hedged rates
  • Empirically, this “insurance premium” is estimated to range from 3 to 13 percent for different types of time-varying rates
  • Illinois used a value of 10 percent in its RTP pilot for residential customers
  • Monte Carlo simulations with a standard financial equation suggest a mean value of 11 percent
  • A conservative estimate is 3 percent
slide16
By adjusting for conservative risk premium, dynamic pricing rates become attractive for 70% of customers
conclusion the way forward should involve a careful look at the range of dynamic pricing options
Conclusion: the way forward should involve a careful look at the range of dynamic pricing options
footnotes
Footnotes
  • See A. Faruqui and L. Wood, Quantifying the Benefits of Dynamic Pricing in the Mass Market, for EEI, Jan 2008.
  • Note: Percentage reduction in load is defined relative to the different bases in different pilots. Following notes are intended to clarify these different definitions. TOU impacts are defined relative to the usage during peak hours unless otherwise noted. CPP impacts are defined relative to the usage during peak hours on CPP days unless otherwise noted.
    • Ontario- 1 refers to the percentage impacts during the critical hours that represent only 3-4 hours of the entire peak period on a CPP day. Ontario- 2 refers to the percentage impacts of the programs during the entire peak period on a CPP day
    • TOU impact from the SPP study uses the CPP-F treatment effect for normal weekdays
    • PSEG program impacts represented in the TOU section are the % impacts during peak period on non-CPP days.
    • PSEG program impacts represented in the CPP section are derived using the reported kWh reductions and the estimated consumption during the peak period on CPP days
    • ADRS- 04 and ADRS- 05 refer to the 2004 and 2005 impacts. ADRS impacts on non-event days are represented in the TOU with Tech section
    • CPP impact for Idaho is derived from the information provided in the study. Average of kW consumption per hour during the CPP hours (for all 10 event days) is approximately 2.5 kW for a control group customer. This value is 1.3 kW for a treatment group customer. Percentage impact from the CPP treatment is calculated as 48%.
    • Gulf Power-1 refers to the impact during peak hours on non-CPP days while Gulf Power-2 refers to the impact during CPP hours on CPP days.
    • Ameren-04 and Ameren-05 refer to the impacts respectively from the summers of 2004 and 2005.
    • SPP- A refers to the impacts from the CPP-V program on Track A customers. Two-thirds of Track A customers had some form of enabling technologies.
    • SPP-C refers to the impacts from the CPP-V program on Track C customers. All Track C customers had smart thermostats.