The California Public Utilities Commission has ordered the state’s three major electric utilities to develop and offer to all customer classes demand flexibility rates in which prices change at least hourly in response to the changing wholesale cost of electricity and other factors.
The new rates are expected to reduce solar curtailment, because when solar generation is high, wholesale electricity costs are lower, and customers who choose flexible rates will be able to shift some of their consumption to lower-cost hours when the sun is shining.
Certain electricity-consuming devices can shift consumption dynamically in response to price signals, using software and communications capability, and more such devices are expected to enter the market.
The Solar Energy Industries Association argued for the flexible wholesale price component, and the CPUC required it, saying it would reduce renewable curtailment.
SEIA also argued for a price component that will support efficient utilization of the distribution grid, to potentially reduce long-term distribution upgrade costs and save customers money. The CPUC required that price component as well, which is based on the marginal cost of expanding distribution infrastructure.
The CPUC said these price components and several others will “provide accurate price signals that promote economically efficient load shifting and support grid reliability.” A primary objective of the requirements is to reduce curtailment of renewable energy and reduce carbon emissions associated with meeting the state’s future system load, the commission said.
Customer protection
The three utilities affected by the rule—PG&E, SCE, and SDG&E—must choose one of several customer protection options to enable wider adoption of flexible rates “without creating large structural bill impacts,” the CPUC said.
One customer protection approach would use two-part subscription tariffs. These rates would include a customer-specific load-shape subscription that is billed at the otherwise applicable tariff rate.
CPUC staff cited a Lawrence Berkeley National Laboratory study finding that this approach would minimize impacts on customer bills and utility revenue recovery, while incentivizing load-shift behavior.
Edward Cazalet, CEO of dynamic pricing consultancy TeMix, has described two-part subscription tariffs by analogy to baseball season tickets.
Exports
The three utilities subject to the CPUC order have the option to include energy export compensation, such as from batteries, in their demand flexibility rates. If export rates are included, those rates would be lower than import rates.
Foundational work
California utilities have conducted several pilot studies of dynamic pricing.
The state’s five largest utilities are already required to post and update at least hourly their existing and newly adopted time-varying rates in the state’s MIDAS database.
Nationwide, achieving flexible demand for power with dynamic prices would yield annual system savings of $33-50 billion, found a 2022 study by Pacific Northwest National Laboratory.
This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.
By submitting this form you agree to pv magazine using your data for the purposes of publishing your comment.
Your personal data will only be disclosed or otherwise transmitted to third parties for the purposes of spam filtering or if this is necessary for technical maintenance of the website. Any other transfer to third parties will not take place unless this is justified on the basis of applicable data protection regulations or if pv magazine is legally obliged to do so.
You may revoke this consent at any time with effect for the future, in which case your personal data will be deleted immediately. Otherwise, your data will be deleted if pv magazine has processed your request or the purpose of data storage is fulfilled.
Further information on data privacy can be found in our Data Protection Policy.