In a previous blog post, I described the threat to utilities of the rise of distributed generation and how they could fend off this risk by highlighting the intrinsic value of their networks. As a cure to load defection, if not grid defection, I suggested monetizing the value the network brings to those same distributed energy resources that threaten it, as well as developing new services other than selling kWh. I also called on regulators to act.
Well, here is one way they could act: Enable time-varying rates. In a recent article, researchers at Lawrence Berkeley National Laboratory showed they could create a force opposite to the one driving the so-called utility death spiral when it comes to distributed solar. With more installed PV on roofs, net peak load will shift from the afternoon to early evening, right after sunset. This is known as the “duck curve” in the electric utility industry, because the load curves have the shape of a big belly (the afternoon) followed by a steep neck (early evening), and then a beak.
With abundant electricity flowing into the grid in the afternoon, prices should drop, while high demand in the evening would raise prices. Time-differentiated rates give prosumers real-time market prices for their electricity, and would thus discourage investment in solar panels for which ROI (Return On Investment) is pushed back by the lower price of electricity during the time at which they produce the most (i.e., the afternoon).
In this way, the introduction of time-of-use pricing or real-time prices for electricity purchased from solar producers will counter-balance the trend of grid defection via a feedback effect. Time-varying rates can be the vaccine that makes utilities immune to the dreaded utility death spiral.
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