ENS4445/ENS5445 SUSTAINABILITY AND RENEWABLE ENERGY LECTURE 3

Economics of Distributed Resources

what is electric utility rate structures

Critical factors for customers evaluating a distributed generation or energy efficiency project intended to reduce electricity purchases.

what is the electric utility rate structure for residential customers

typically includes a basic fee to cover costs of billing, meters, and other equipment – supply (service) charge - plus an energy charge based on the number of kilowatt-hours of energy used – electricity charge.

what is declining block rates (electric utility rate structures)

Declining block rates make electricity cheaper as the customer’s demand increases, which discourages conservation.

what is inverted block structure (Electric Utility Rate Structures)

Inverted (inclining) block structure to discourage excessive consumption in peak season

what is time of use rates (Electric Utility Rate Structures)

Time-of-use rates to encourage customers to shift their loads away from the peak demand times.

what are demand charges based on

Demand charges that apply to commercial and industrial customers are based on the peak demand in a given day or month.

how are customers with lower load factors accounted for

The utility needs more generation, transmission and distribution capacity to serve the customer with the lower load factor

what will encourage customers to shed some of their peak power.

Energy charges won’t differentiate between the two, but demand charges will

compare flat rates to dynamic pricing

Compared to flat (non-time-varying) rates, dynamic pricing can lower power system costs (by improving the system load factor) and raise economic efficiency

how dose dynamic pricing work

by clipping off the highest peak loads during the year which can account for anywhere from 7 to 17 percent of system load

Who do demand charges apply to?

Commercial and industrial customers, based on peak demand.

What is a benefit of Real-Time Pricing (RTP)?

Reduces peak load and improves system efficiency.

What do studies show about dynamic pricing?

Customers reduce peak usage when pricing changes dynamically.

What is cross-subsidization in rates?

Flat rates ignore load factor, so inefficient users are subsidized.

What is a key advantage of Simple Payback Period?

It’s easy to understand but ignores long-term value.

What is NPV (Net Present Value)?

Present value of all future costs and cash flows.

What is IRR (Internal Rate of Return)?

The discount rate where NPV equals zero.

What is Levelized Bus-Bar Cost?

Annualized cost per unit of energy over the system life.

What do Energy Conservation Supply Curves (CCEs) show?

Energy savings potential versus cost.

What is DSM (Demand Side Management)?

Managing demand timing and amount to reduce peaks and costs.

What are DSM approaches?

Load reduction and load levelling.

What is Peak Clipping?

Reducing the maximum system load directly.

What is Valley Filling?

Increasing off-peak load to smooth demand.

What is Load Shifting?

Moving energy use from peak to off-peak times.

What is Strategic Conservation?

Reducing energy through efficiency improvements.

What are DSM limitations?

Customer participation and communication costs.

What are DSM types?

Environmental, Network, and Market driven.

What is Load Reduction?

Decreasing energy use through tech or agreements.

What is Load Shedding?

Dropping some loads for system security during shortages.

What does Smart Metering allow?

Remote reading, control, and outage detection.

What was the goal of the Binda Bigga Project?

Reduce winter evening peaks via fuel switching.

What are Supply Side Options?

Pricing, scheduling, investments, and generation diversification.