Time-varying Electricity Price
At present the majority of electricity customers pay a flat rate for their electricity. They pay the same for a unit of electricity regardless of when they use it. Under time-varying pricing, the price per unit of electricity varies according to the time of the day or night at which the consumption occurs.
The reason for implementing such time-varying tariffs is to send price signals to customers that better reflect the actual underlying costs of generating and supplying electricity at a given moment in time. By exposing customers to prices based on these costs, utility companies can reduce or shape customer demand profiles which lead to a more efficient system. If the cost of adding new generators to meet certain demand profiles can be avoided by instead modifying these demand profiles the overall cost of the electricity system is reduced.
During the 2010 Smart Metering trials in Ireland, a range of time-varying (also called time of use or TOU) tariff structures are being evaluated. One example of the tariffs being tested is as follows. For every day of a working week, the price of a kilo-watt-hour of electrical energy is as follows for each period:
- From 5pm to 7pm it will cost 32 cent per kWh
- From 7pm to 11pm it will cost 13 cent per kWh
- From 11pm to 8am it will cost 10 cent per kWh
- From 8am to 5pm it will cost 13 cent per kWh
So, you can see that during the peak time, of 5pm to 7pm, the electricity is most expensive, because that happens to be when it is most expensive to produce.
Click here to find out about plans for the rollout of Smart Meters
An additional link for extra information on this can be found on the Commission for Energy Regulations (CER) website: