Fellows in the News

How does California’s energy pricing system impact consumer behavior, grid reliability, and the environment? This paper addresses the criticisms of the current system: pricing inefficiencies, blackouts, and negative environmental impacts. Although demand is highest during certain times—noon to six pm on weekdays—consumers pay a rate based on total electricity generated, regardless of demand fluctuations. Much like a plane ticket costing more on Thanksgiving, time variant pricing is used to alter consumer behavior and can encourage electricity consumers to modify their habits. Decreased reliance on “peaker plants,” the fossil fuel heavy backup plants needed to meet high demands, will subsequently decrease greenhouse gas emissions. Other advantages of time variant pricing include more reliable electric grids and increased investment in green technologies. Time variant pricing raises concerns including skepticism of overall consumer behavior response and impacts on low-income families. These concerns are addressed, with successive policy solutions recommended by the authors. This paper concludes that time variant pricing will lower overall electricity costs to both consumers and producers, improve grid reliability, and ultimately cut greenhouse gas pollution by reducing the use of fossil-based generation.

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