Smart Technologies + Smart Rates = Power System Flexibility

Why Is the Smart Grid So Dumb?: Missing Incentives in Regulatory Policy for an Active Demand Side in the Electricity Sector

January 26, 2023 (Energy Systems Integration Group)

“…[R]etail pricing may be used more widely and more efficiently to allow flexible demand to respond to grid needs as the role of demand becomes increasingly important for the reliability of the grid…Advanced metering infrastructure was supposed to transform the retail customer experience, empowering demand to participate in a genuinely two-sided market across from supply.

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But as smart meters become ubiquitous, few retail customers see time-of-use prices related to the cost elements of electricity service that vary over time. Someone, somewhere must face clear incentives to actively manage demand in order for it to happen. Yet even the companies that serve retail customers too often lack meaningful exposure to these costs…[Incentives face] two different types of retailers: …Regulated utilities under modern amendments to traditional cost-of-service regulation are usually deadened to incentives altogether, or even perversely incentivized. Competitive retailers typically are faced with incentives around supply costs, but too often have no role billing for and intermediating other network charges…

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…[Reforms include] time-of-use rates as the default retail product for regulated-utility customers…[and making] all retailers exposed to and responsible for billing all relevant grid costs, and public investment and standards for automated devices. Absent these reforms, transformation of electric grids—increasingly subject to intermittent supply, volatilely priced fuels, and rising demand—will be costlier and slower.” click here for more

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