Introduction and Context
Elsewhere, we discuss the desire by utility companies to align customer pricing with the cost to supply energy. As pointed out, a large part of the cost structure derives from fixed-cost capital such as the towers and lines that deliver energy to our homes. However, a significant part of our costs also derive from the fuels needed to produce that energy. These costs are considered “variable” in nature and include the expense for turning on that extra power plant to match peak load. Briefly, due to the “chunky” nature and the mix of fuel sources on the grid, true costs of energy vary throughout the day. To help control around this variable price of electricity, utilities increasingly provide incentive for consumers to use cheaper energy. As a result, consumers may save money by shifting their energy load to favorable times.
Energy's Variable Cost
For example, in markets with significant wind and solar, the supply of energy can spike when the wind blows and the sun shines. If this supply is not met equally by demand, then prices fall. In contrast, if demand picks up quickly, supply constraints may lead to short-term high prices. Due to these supply-and-demand pressures, prices can vary by factors of 10 or more on a given day. The figure below helps us see price changes over a given week. Even more remarkable (and not shown in this graph) prices can actually go negative!
As a result, more and more with time, utilities wish to send price signals to help flatten out energy consumption throughout the day. They do this by means of plans with names such as “time-of-use” and “peak demand.” In extreme cases, it is possible to purchase energy at prices that follow real-time costs on the grid.
Emporia Savings Summary
Regardless of price signals sent by the utility, consumers cannot realize savings unless they do two things. First, they must actually switch to a plan that fits their lifestyle. Second, they must manage their energy consumption in a way that minimizes costs on their chosen plan. By taking these steps, consumers can save money by shifting their energy load.
The Emporia Vue uniquely provides excellent real-time demand data to consumers. Further, with time, it will also provide supply-side information and timely notifications to help avoid poor and costly usage decisions. For example, a consumer on a peak-demand plan should avoid running multiple appliances at the same time. Or, a consumer on time-of-use could move dish-washing, clothes-drying, or even some baking to less pricey times of day.
Given the variability in real-time pricing as well as the 4xprice increase for peak electricity use, Emporia sees savings of up to 25%possible for load-shifting strategies. However, actual savings clearly will relate to how well each individual manages to shift their load!