California is embarking on a disruptive strategy to grow consumer adoption of smart and clean electricity technologies. Starting in 2019 the state’s three investor owned utilities, serving 80 percent of the state’s electricity customers, will launch Time Of Use (TOU) pricing for residential consumers. The utilities are now signing up volunteer residential customers to refine price designs based on actual customer reactions.
The question confronting California’s strategy is whether high prices charged to residential consumers during peak periods is a “bridge too far." Will residential customers respond by buying smart and cleaner technologies to access lower prices? Or will they vote in revolt?
A rate department reported to me during my electric utility career. We implemented a form of TOU pricing called Real Time Pricing (RTP). In this type of price design, consumers are provided a difference price every hour. The consumer characteristics we identified for a win/win result were:
The question is: Will, or can, California residential consumers respond to peak prices by reducing their demand during the very time period they place such a high value on air conditioning? The answer is yes, if TOU sparks residential consumer purchases of smart appliances, solar power and batteries. TOU can be the financial incentive that drives mass-market adoption of Zero Net Energy buildings. The answer is no, if consumers simply revolt and this revolt translates into voter action.
I applaud California for taking this risk. I am signing up to be in the TOU test program. But professionally, this looks like a bumpy ride.
The great news is that technologies like rooftop solar, onsite batteries and smart building systems are commercially available and will allow consumers to harvest lower bills through TOU pricing. But the key question is: How much price-pain will be required to motivate consumers to buy and use these technologies? I hope consumers and the state can work through this turbulence. The result will be lower electricity bills, increased electricity reliability, increased comfort, dramatic local job growth and reduced emissions.
Image credit: Flickr/Traci Lawson
Bill Roth is a cleantech business pioneer having led teams that developed the first hydrogen fueled Prius and a utility scale, non-thermal solar power plant. Using his CEO and senior officer experiences, Roth has coached hundreds of CEOs and business owners on how to develop and implement projects that win customers and cut costs while reducing environmental impacts. As a professional economist, Roth has written numerous books including his best selling The Secret Green Sauce (available on Amazon) that profiles proven sustainable best practices in pricing, marketing and operations. His most recent book, The Boomer Generation Diet (available on Amazon) profiles his humorous personal story on how he used sustainable best practices to lose 40 pounds and still enjoy Happy Hour!