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WILL THE SMART GRID ENABLE DYNAMIC PRICING?

WILL THE SMART GRID ENABLE DYNAMIC PRICING? . Ahmad Faruqui, Ph. D. NE Electric Restructuring Roundtable Boston, Massachusetts October 28, 2011. The views expressed in this presentation are strictly mine and not necessarily of The Brattle Group, Inc .

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WILL THE SMART GRID ENABLE DYNAMIC PRICING?

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  1. WILL THE SMART GRID ENABLE DYNAMIC PRICING? Ahmad Faruqui, Ph. D. NE Electric Restructuring Roundtable Boston, Massachusetts October 28, 2011 The views expressed in this presentation are strictly mine and not necessarily of The Brattle Group, Inc.

  2. The Smart Grid is rolling out at a rapid clip No where is this more evident than in the rollout of smart meters, with 22 million deployed already The number is projected to grow three-fold in five years and by 2025, all 135 million residential customers may be on smart meters But how many will be on dynamic pricing? • Currently, only 1 percent are on time-based pricing

  3. Has the tide turned? In a recent survey, 7 state commissions indicated that they support dynamic pricing 50% of the AMI business cases being submitted by utilities reference dynamic pricing Dynamic pricing was one of the Top 5 issues cited in a survey of utility executives Brattle’s poll of 50 energy experts indicates that dynamic pricing may be adopted by 20 percent of customers by 2020

  4. What has made a difference? The inexorable roll out of dynamic pricing experiments About two dozen have been carried out over the past decade across three continents, involving more than 100,000 customers and 109 tests

  5. When filtered by rate and technology, the impacts yield a “Manhattan Skyline”

  6. The best-designed pilots allow us to infer the “Arc of Price Responsiveness” with much clarity

  7. In most cases, the inclusion of enabling technology boosts price responsiveness

  8. Low income customers are likely to benefit from dynamic pricing, even if they don’t respond Bill decreases (savings) Bill increases

  9. And low income customers do respond

  10. References • The Brattle Group, “DRex: International Database of Dynamic Pricing Experimental Results,” July 2011. • Faruqui, Ahmad and Jenny Palmer, “Dynamic Pricing and its Discontents,” Regulation, Fall 2011. • Faruqui, Ahmad, Ryan Hledik, Armando Levy and Alan Madian, “Smart pricing, smart charging,” Public Utilities Fortnightly, October 2011. • Faruqui, Ahmad and Sanem Sergici, “Dynamic pricing of electricity in the mid-Atlantic region: econometric results from the Baltimore gas and electric company experiment,” Journal of Regulatory Economics, Volume 40: Number 1, August 2011. • Faruqui, Ahmad and Sanem Sergici, “Household response to dynamic pricing of electricity–a survey of 15 experiments,” Journal of Regulatory Economics (2010), 38:193-225.

  11. Biography Ahmad Faruqui is an expert on matters involving the interaction of customers with the smart grid. He has assisted utilities and state and federal commissions assess the economics of dynamic pricing, demand response, advanced metering infrastructure, and energy efficiency. He pioneered the use of experimentation in understanding customer behavior and his early work on time-of-use pricing experiments is cited in Professor Bonbright’s textbook on public utility rates. He assisted the U.S. Federal Energy Regulatory Commission (FERC) in preparing a National Action Plan for Demand Response, which built on work he did earlier that helped quantify, on a state-by-state basis, the potential for demand response in the US.  In prior years, he has assisted the Electric Power Research Institute in quantifying the potential for energy efficiency in the US and the Edison Electric Institute in quantifying the benefits of dynamic pricing.  He has also worked with ISOs and RTOs in the Midwest, New England, New York and PJM.   He has appeared before commissions and legislative bodies in Arkansas, California, Colorado, Delaware, the District of Columbia, Illinois, Indiana, Kansas, Maryland, Minnesota and Ontario, Canada. He has also addressed several meetings of state and provincial commissioners in the US and Canada and been a featured speaker at conferences in Brazil, France, Ireland, Saudi Arabia and the United Kingdom. The author of four books and more than a hundred papers on energy policy, Faruqui holds a doctoral degree in economics from the University of California at Davis and bachelors and masters degrees from the University of Karachi, Pakistan.

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