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!
Source: When you use energy matters | San Diego Gas & Electric
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.
When my colleagues and I developed the theory of real time electricity prices back in the dark ages (1982), we were amused to see that our equations allowed for the optimal price to be negative. Power companies would pay consumers to use more electricity! At the time, we thought it was a paradoxical case that was unlikely in practice, except possibly in the middle of the night in systems with lots of nuclear units.
Fast forward 30 years, and negative prices are a regular occurrence in real systems, including in Texas and California. And now they are even happing in the middle of the day. But there is still a puzzle: why don’t generators stop generating the moment the price goes negative?
Several blog posts from Berkeley’s great Energy Institute, and my response to one of them, show that real power systems can have a lot of unanticipated phenomena. Take together, these probably explain these apparently strange behaviors.
Source: Is Solar Really the Reason for Negative Electricity Prices? – Energy Institute Blog. and from Catherine Wolfram, Is the Duck Sinking?