Wednesday, June 6, 2012

Dynamic Pricing ... Finally

There have been lots of reports lately about attempts to limit peak electricity demand through dynamic pricing schemes.  These are well known in the rest of the world (our residential electric bill had such a scheme in Maryland almost 15 years ago) ... but have been absent from Japan.

Wow.  Japan really is entering the 21st century, or at least the latter part of the 20th century.  Maybe next Japan will introduce daylight savings time, and our dog will start waking up and asking to be let outside, fed and walked at 5:30AM, instead of 4:30AM?  That would be really nice, but I will not hold my breath.

In any event, both TEPCO and Kansai Electric (KEPCO) announced optional peak pricing plans ... but the plans were underwhelming, did not offer particularly steep off peak discounts, and the response has been dismal.  TEPCO has gotten 130 households to sign up, and KEPCO only 230 households, out of the tens of millions in these service areas.  Probably the 360 households are all childless working couples, who use no electricity at all during the "peak" hours at least 5-6 days a week, so the reduction in electricity consumption will be ... zero.  And the plan requires installation of meters that are actually able to measure consumption at specific times of day ... as opposed to the existing base of meters.

And nothing about any of the preceding efforts is "dynamic" -- just peak and off-peak.

Finally, today, a story in the Nikkei that one of the new electricity supply entrants (power producer and supplier or "PPS"), Ennet (新電力 エネット), which has the NTT group and Tokyo Gas as its lead shareholders, will introduce a summer peak pricing scheme to encourage conservation by its large scale customers.  (Ennet does not -- cannot -- serve residential customers, under the current regulatory regime).  It has actually signed up contracts for the new structure with major customers such as the Aoki menswear chain, Mitsukoshi/Isetan Department Stores, Oji Paper and various schools/universities.  There will be off peak, peak and middle pricing.

And provided that notice is given the evening before, there are two additional special peak pricing features.  (It is this advance notice that is the "dynamic" feature).

Under one plan, pricing on the off peak and middle periods will be reduced by several yen per kWh below normal, and during the 13:00-16:00 peak, pricing will soar to 3x normal -- around 50 yen per kWh!

The other alternative does not offer any discount for the off peak and middle peak hours, but will pay a rebate of around 15 yen per kWh by which consumption is reduced against a benchmark.

Ennet suggests the new plan will actually save customers money if they can make minor shifts in demand.  And it avoids a need to go and beg customers to cut peak demand ... the approach taken by the incumbent utilities.

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