Households face power-pricing revolution
– John Kemp is a Reuters columnist. The views expressed are his own —
Households in the United States and the United Kingdom are about to experience a revolution in the way they pay for electricity.
Over the next decade, almost all homes will be fitted with “smart meters” recording the time as well as the quantity of electricity used. Most customers will face some form of dynamic pricing that relates the price they pay for each kilowatt hour (kWh) to the actual cost of generating it.
Smart meters and dynamic pricing are critical to using the generation and transmission system more efficiently while accommodating a growing share of renewables (wind, solar) on the grid without sacrificing reliability. VARIABLE DEMAND
Power cannot be stored, and the amount demanded by customers (“load”) is highly variable, so system operators hold large amounts of generating capacity in reserve to cope with demand peaks or outages when generating units become unavailable.
Many generating units must be built and maintained even though they may only be used for a few hundred hours each year. The greater the variability in load the more idle capacity has to be maintained. In general, usage is higher during the day than at night, and higher in summer than winter, owing to increased airconditioning demand.
The problem will get worse over the next decade as the share of generation from renewables such as wind and solar, which cannot be scheduled in advance, increases. Even more back-up capacity will need to be held in reserve in case renewable power is not available at peak times.
I think it is fairer to use smart metering–energy customers will pay for what they use and will be able to adjust consumption accordingly. If the cost of the smart thermostat is prohibitively expensive for some households, perhaps it should be subsidized. As for the suggestion above that customers pay the same rate, are you suggesting a fixed cost regardless of consumption? If so, that makes no sense whatsoever: Should all driver’s pay a flat fee for gasoline, regardless of how much they drive?
Yes, I think this will require some supervision of the power companies–as somebody commented earlier, utilities may be an “honesty-challenged sector.” But, the premise for smart metering makes perfect sense: charge customers the marginal cost their energy usage. If you use lots of power, yes, you will pay more; if you make an effort to conserve, you’ll pay less.