Reforming Electricity Pricing

I've had this idea published in the Ottawa Citizen "Letters to the Editor" pages, and it seemed like a good idea then, and it still seems like a good idea now :-)

The basic idea is that in order to help conserve energy, and thus lessen the need to bring online new plants, we should have a two-rate system that's sensitive not to the amount consumed, but to when the electricity is consumed. I've seen this system successfully implemented in Prague in the Czech Republic, for example.

The idea is simple. Let's say that the peak power consumption happens between 7 AM and 9 AM, and again between 4 PM and 6 PM. During these peak periods, the price for electricity would be at a premium. For the sake of argument, let's say double what it is now. During the off-peak times, the price of electricity would be at a discount — again for the sake of argument, let's say half the current price.

This will encourage people to save electricity when we need to save it the most — during the peaks. When electricity is conserved during peak periods, it means that the peak usage is effectively "smoothed out", and we won't face summer blackouts nor the need to bring on additional capacity.

It's not difficult to implement! The way it's done in Prague is that you have two electricity meters. One measures peak usage, the other measures off-peak usage. I'm not sure if there's a signal on the line, or if it's done via a timer, but during peak periods, the electricity is routed through the Peak Period Meter, and during off-peak periods, the electricity is routed through the Off Peak Meter. When your bill arrives, it indicates the number of kilowatt-hours (kWh) used on each meter, and the total price.

A large number of homes in Prague are wired up for electric heat, but the kicker is that the electric heat is on only during off-peak periods.

Think of how this will work during the summer. Instead of your air conditioner running 24 hours a day, it would run only during off-peak power times. This means that your house would warm up a few degrees between 4 PM and 6 PM — not a big deal. But the savings for the infrastructure would be huge. Another large energy user is an electric dryer — again, it doesn't have to run during peak power usage, it could run earlier or later.

The best part about such a system is that it could be introduced on a voluntary basis — you call up your local electric company and ask to have an additional meter installed. I'm not sure what a meter costs, but I'd be amazed if it was more than $500 to $1000 — this can be subsidized by the government, instead of paying more money to build additional capacity. The savings would be up to each household to realize. Heck, they could even have free electricity between midnight and 2 AM to charge your electric car with :-)

As an added bonus, with clever wiring in your home, you could make it so that large appliances would run using only off-peak power (automatically) — when the off-peak power meter turns on, it trips relays in your circuit breaker panel to route power to "off-peak-only" appliances. In case of an emergency, you could have a manual bypass switch that routes power to these appliances during peak periods.

Doing a "back of the envelope" calculation, if you consider a central air-conditioning system consuming say 2kW, and the rest of a typical house consuming 1kW, this means that automatically turning off the air-conditioning system during peak times will result in a peak load reduction of a whopping 66%! Even being unreasonable and skewing these numbers the other way, for example by saying that the air-conditioning system consumes only 1kW and the rest of the house consumes 3kW (for a total of 4kW), would still result in an amazing 25% peak-load reduction; certainly still worthwhile!

As with any "good idea" though, the trick is to get it adopted. If you think this is a good idea, why not contact your local utility company, and your elected representatives and pitch it to them? If nobody does this, nothing will happen. If everyone does it, it's a done deal. Reality is somewhere in the middle.

Read about the cost of electricity in my server room

Additional Notes

In August, 2004, I received an email from a gentleman in Toronto, which basically said:

Toronto Hydro has already used a similar system called Power shift with a single digital meter with 3 or 4 time zones after 11 pm being the cheapest. It was a limited # of houses volunteer program in the early 90's, they installed the meter free if you asked for it. In 1998 I sold my house and haven't heard anything about it since.

When I attended a focus group a couple of years ago giving my opinion about the TV Advertisement offering Hydro rebates I asked about it, someone said it was discontinued, I haven't followed it up yet but I agree it should be brought back.

Update 2005 01 27

This week, I heard a news item on CBC Radio about the deployment of smart meters within Ontario. Calling the local utility company, they referred me to the Ontario Energy Board's website, which has details of the implementation plan. The short answer is that by 2010, all Ontario customers will have smart meters that are sensitive to time-of-day usage, and will even have the ability to report the usage from the previous day (as well as historical data) over the phone or Internet.

As Mr. Burns would say, "Excellent...".