DR on the upswing, but dynamic pricing? We're not so sure

DR on the upswing, but dynamic pricing? We're not so sure


By: SGN Staff

Quick Take: Pike Research's latest report on demand response (DR) catalogs the gradual uptick of residential DR. In fact, they predict the number of participating households will more than double by 2018 to reach 23 million. As you can read below, they also speculate that dynamic pricing may be the preferred triggering mechanism.


We agree in principle... but not in practice. In principle, time-of-use and other flavors of dynamic pricing are a straightforward way to signal households to lower demand. In practice, however, new rate plans have to be approved by regulators - and U.S. regulators have historically been loathe to institute dynamic pricing, partly in fear of its effects on low-income customers.


There may be a middle ground. Pacific Northwest National Laboratory's transactive technology, which is currently powering the Pacific Northwest Smart Grid demo, provides a way to send a "value signal" that may be more palatable to regulators. Dynamic pricing typically uses the "stick" approach - use more energy during peak times and we will penalize you with higher prices. Transactive technology typically uses the "carrot" - use less energy during peak times and we will give you an incentive. - By Jesse Berst


In a new study report, Pike Research says utilities in other parts of the world are following the lead of their U.S. counterparts in residential demand response. The cleantech market research firm says utilities are coming to understand DR's benefits for both themselves and their customers in managing electricity demand.


The result? Pike says more than 23 million households will be participating in DR programs by 2018, more than twice the number of participants today.


The report also finds that the fastest growing part of the residential DR market will be price-based programs based on dynamic pricing - and concludes that may represent a major change in how DR is dispatched. Of the 23 million participating households, 8.7 million - one third - are forecast to be enrolled in a price-based program of some kind by 2018.