How Smart Utility Rates Could Affect Grid Investment Costs and Monthly Bills

Jan 7, 2016 1:34:00 PM by NuEnergen

billing.jpgEnergy users could soon enjoy the luxury of slashing their electricity bills by as much as 40 percent while enabling utilities to scale back on billions of dollars in costs each year. How is this possible? Demand flexibility, which allows for the shifting of energy usage across a given day based upon pricing signals, is the key. A recent study by the Rocky Mountain Institute (RMI) has predicted these significant potential savings based upon consumer air conditioning and hot water usage, as well as clothes dryer timers and the timed charging of electric vehicles. 


What does this mean for you and the utility sector exactly? This post will shed some light on the impact that demand flexibility might have on the market, the changes that have already come about as the result of demand flexibility, and what to expect going forward.


A Whole New Market for Third Parties


RMI’s research concluded that the potential for savings is substantial when third party sources step up to the plate and guarantee energy bill savings through working with modern tech and dynamic utility rates. This means embracing real-time pricing, demand charges, etc. In many ways, the process is reminiscent of battery storage enterprises which sell technology to commercial customers as a means of reducing peak-demand costs while potentially making more money in ancillary markets. Utilities, though, can reap the benefits of having distributed storage. Consequently, some states and utilities are taking a look at improving their methods of aligning rates in such a way that they can take advantage of those resources and provide compensation for those that own them. 


Current Changes


The changes and opportunities tied to demand flexibility are more than just theories. You’ll find that some utilities are beginning to tap residential loads as a means of smoothing peaks and creating grid balance. Others are considering the idea of solar tariffs and other means of requiring customers to pay for grid services in direct proportion to the time they use it, thus maximizing savings. High fixed charges are on the way out, to be replaced by good rate design, which will provide a framework for the stable regulation of utilities while bolstering the growth of renewable energy. We’re sure to see more of this in the coming years.


Looking Ahead


Research has indicated a vast amount of potential within residential markets in terms of shaping and shifting energy loads. Although there are more complexities involved in large commercial customers, RMI has still concluded that the potential business is huge. This is especially true when you consider that more than 65 million Americans already have at least some means to accessing and using time-of-use rates. 


Even though some utilities are taking steps forward, it’s important to realize that this is all still very largely uncharted territory. It will take courage and willingness to blaze onward and to take advantage of all that demand flexibility has to offer. In the meantime, keep an eye out for further information posted to our blog on this matter and reach out the the experts at NuEnergen for more information on demand flexibility.