Definitions
Dynamic pricing (DP) is
| “ | [a] regime in which retail customers face energy prices that vary with the contemporaneous cost of generation or state of [supply-and-demand conditions in the electric power system. Prices may be based on day-ahead or hour-ahead forecasts of conditions, and may change for as few as 60 "critical peak" hours per year, or may change hourly or more often in real-time pricing plans.[1] | ” |
| “ | the family of rates that offer customers time-varying electricity prices on a day-ahead or real-time basis.[2] | ” |
Categories of dynamic pricing
Three principal categories of dynamic pricing include:
- Real-time pricing — rates are based on hourly fluctuations in wholesale markets, which enable consumers to plan their electric use to coincide with low prices.
- Peak-time rebate — the traditional blended rate applies, but customers can realize healthy rebates for reducing load during peak periods.
- Critical-peak pricing — prices can increase by 500% during peak periods, limited to a small number of hours per year. Customers agreeing to reduce usage in such hours will pay slightly lower rates for the remainder of the year.
References
- ↑ Massachusetts Inst. of Tech., The Future of the Electric Grid, Glossary, at 262 (2011) (full-text).
- ↑ SmartGrid.gov, Glossary (full-text).