Market-Based Dynamic Pricing Integral to Smart Grid Implementation, Climate Change Mitigation

Two groups this week underscored the need for consumer access to real-time dynamic electricity pricing to reduce greenhouse gas emissions and save money on their bills. On Monday, the Association of Home Appliance Manufacturers (AHAM) released a white paper strongly advocating that “residential electricity prices must be based on time of use” to fully enable smart grid technology. Yesterday, multiple high-tech companies and advocacy groups issued a statement at the United Nations-sponsored climate change negotiations in Copenhagen (COP15) urging world governments to ensure consumers see real-time energy use data to improve energy efficiency and cut greenhouse gas emissions.

These calls for consumer access to dynamic pricing – or energy prices that reflect variables such as peak demand and available generation capacity – are the latest examples of independent groups highlighting the benefits available through competitive electricity markets. A federal report released this summer by the U.S. Federal Energy Regulatory Commission showed the greatest potential for reducing energy demand would only be realized if consumers respond to dynamic price signals through smart meters and demand response programs.  

COMPETE has advocated most strongly for electricity consumers to see and be able to respond to real-time market-based prices. Customers in competitive markets who can respond to market-based price signals enjoy a powerful tool to control and reduce their power demand, electric bills, and greenhouse gas emissions.  This will be helped immensely with emerging smart grid and smart metering technologies, as well as through further innovations spurred by competition between multiple market bidders who must challenge themselves to provide the best possible service to customers. In traditionally regulated markets where one utility maintains a monopoly, the incentive to provide innovative pricing and service does not exist, and the tremendous potential of energy efficiency and innovation goes unrealized.

We’re glad to see so many voices joining the chorus for dynamic pricing, which is best provided through competitive markets for electricity.  Further, we strongly urge state and national policymakers to allow the evolution of competitive reforms in electricity markets to continue so that consumers may benefit from technological innovations that promise to help us meet important economic and environmental goals.

Joel Malina | December 16, 2009