nota

Real Time Pricing Seminar

Severin Borenstein gave a very informative talk about real time electricity pricing during the latest CITRIS Research Exchange at UC Berkeley. Real time (we’re talking “real-time” on the order of minutes) electricity pricing should increase the market efficiency of the electricity market. Whereas today, the wholesale and retail markets are not connected in real time. One concern Severin pointed out was that real time pricing may increase bill volatility - which is a bad thing. The solution? Hedging. Severin suggests that to do real time pricing correctly the end consumer should hedge, or buy electricity at future prices — then when the time arrives either buy more at the spot market price or even sell back into the market. Severin also pointed out that Demand Response — the latest instantiation of real-time pricing — is not necessarily a “green” effort. Rather “Green” Demand Response is a regional issue depending on the base load generation. His example was Pennsylvania, a state with a large coal base. Coal also happens to be very dirty compared to peaker plants in the region. So if more people shifted load in Pennsylvania, then more coal-generated dirty electricity would be produced. The bottom-line: be sure to look at all the costs associated with Demand Response and real-time electricity pricing.