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Dynamic pricing

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Definitions Edit

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 Edit

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 Edit

  1. Massachusetts Inst. of Tech., The Future of the Electric Grid, Glossary, at 262 (2011) (full-text).
  2., Glossary (full-text).

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