Riding the Electricity Market as an Energy Management Strategy: Savings from Real-Time Pricing
- U.S. General Services Administration, Washington, D.C. (United States)
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
Dynamic pricing of electricity, in which retail prices facing customers are responsive to changes in the underlying wholesale markets, represents a step towards economic efficiency in that customers get exposed to some or all of the costs facing wholesale market players. But what do customers who opt for this greater exposure – available in the roughly 15 “de-regulated” states, as well as, to some extent, from some regulated utilities – get in return for their risks? The U.S. General Services Administration (GSA) took a retrospective eight-year look at what the savings would have been had they let the loads for which they purchase electricity in the Washington, DC area buy electricity on the real-time pricing (RTP) market – the dynamic pricing option with the highest risk – as opposed to the strategy they chose in actuality, which was fixing flat prices with 3rd-party providers. We found that opting for RTP for the eight years of the study (2005 through 2012) would have resulted in 17% savings, or almost a quarter of a billion dollars, relative to GSA’s actual prices from the 3rd-party suppliers. This is particularly astonishing given that GSA appeared to have timed the market well during the study period, consistently beating the standard offer products provided by the distribution utilities. The issue of budgetary predictability poses an obstacle for customers (especially government ones) considering RTP and, to a lesser extent, other dynamic pricing options. Indeed, GSA would have lost money with RTP in two of the eight years, one of them substantially. But the magnitude of the savings is indisputably compelling and, even if it may be somewhat aberrational due to high congestion in the DC market, begs consideration by large electricity users currently paying to “lock in” fixed flat prices.
- Research Organization:
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
- Sponsoring Organization:
- USDOE Office of Energy Efficiency and Renewable Energy (EERE)
- DOE Contract Number:
- AC02-05CH11231
- OSTI ID:
- 1425679
- Report Number(s):
- LBNL-1004321; ir:1004321
- Country of Publication:
- United States
- Language:
- English
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