OnDemand WTP Pricing Research

Complete Energy Democratization Is Coming. Let’s Get Ready. | Shift NewCo

The underlying problem is that there aren’t many financial incentives for customers to buy smart meters (most customers who do have smart meters were required by their state, or were heavily subsidized, to install them). At present, smart meters don’t matter for most customers because they don’t make a difference to cost. Most customers are still billed under legacy electricity prices from when we only had “dumb” meters that could only measure cumulative kWh used, and are charged a fixed $/kWh at the end of a month. (Such pricing is nonsensical — it’s the equivalent to paying for groceries by measuring their weight at the register.) Electricity is more valuable on certain areas of the grid and during certain times of the day, and so prices should fluctuate minute by minute, depending on system loads, geopolitics (for example, instability in Iran forced oil prices to a 3 year high this January), location (some customers may be in congested corners of the grid where electricity is more valuable), scheduled maintenance, etc. But they aren’t, and it keeps people from caring about their electricity use.

We know people should, in theory, care about energy , because Americans are very price sensitive when it comes to gasoline prices. The problem with the electricity sector is that prices don’t change, so there’s very little to care about (according to Opower, the average person thinks about energy use for only 9 minutes a year). At present, only around 8 million Americans are able to participate in a “smart pricing” program that lets them save money by reducing their energy usage at certain peak times, according to the Edison Foundation. People need dynamic electricity rates so that they have an incentive to install smart meters and save money — in a 2016 study, Commonwealth Edison, the largest utility in Illinois, found that customers (with no change in behavior) could save 13% on their bill just by billing them hourly based on wholesale market prices. We know systemwide dynamic pricing is logistically possible too, because this pricing structure has long been applied to large commercial customers.

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Complete Energy Democratization Is Coming. Let’s Get Ready..