This picture looks exciting, doesn’t it? But the vertical axis is not to scale. In fact the price changes are so small that they are barely visible. See the next figure. For 7 months a year, my prices will vary by only $.02/kWh over a week!
Our local utility, San Diego Gas & Electric, just sent us a notice that we will be switching to Time of Use (TOU) pricing. I have no objections, BUT:
- TOU was innovative in the 1980s. But for any house with a smart meter, which we all have now, it has been dominated by real-time related pricing for at least 20 years.
- The price differentials are negligible – 1 cent per kwh, or about 3 percent! In the winter almost nobody will adjust their usage, or even keep track of it. At least differences in the summer are substantially larger – as much as 30¢ per kwh.
I wrote about the weaknesses of TOU pricing in my PhD dissertation, more than 35 years ago! The issues that were relevant then are even more relevant now, because of the growing penetration of renewable generation. One TOU problem is that since the TOU prices have to be fixed for about 125 days per year (all weekdays in the Summer, for example), they cannot track the actual fluctuations in demand, solar generation, or wind generation. The time blocks are also forced to be fixed.
TOU fixed prices and timing no doubt accounts for the tiny 1¢ price changes during the winter in the new San Diego rates. There are going to be some winter days when much bigger shifts would be appropriate; but there will be others when the optimal price is not correlated with those time blocks at all. So the rate will basically suppress all the change.
And to be fair, SDG&E will also have a rate with up to 18 special super-price days a year, which are not fixed. This is a degenerate version of real-time prices, but better than nothing. But I can’t figure out what the actual prices will be!