Real-Time Pricing: Paying at the Margin

Fortnightly Magazine - November 1 1996
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Savings, yes. But some load-management

techniques may imply trade-offs in service

quality.By Scott L. Englander, John E. Flory,

Leslie K. Norford, and Richard D. TaborsAs facility manager for a large hotel, you browse your energy vendor's web site to view tomorrow's hourly prices. But it seems your computer (pc) has already done some browsing of its own. Since it's connected to your energy management system, your pc has already looked up the weather forecast and has logged on to the hotel's main computer to find out what rooms will be used. Using this information, your computer is now churning through several billion operating scenarios to pick the least expensive energy strategy for the following day.

A while later, an incoming e-mail message describes the operating schedules for your facility's mechanical systems. You see that while prices will skyrocket to over $1 per kilowatt-hour (Kwh) for a couple of hours in the afternoon, your pc has planned an operating scenario that will take advantage of bargain basement prices during the early morning hours to shift certain loads, and will run your auxiliary generators when the high prices kick in. A comparison shows you that your total bill for the month will undercut what you would have paid under your previous conventional electricity rate. You leave for the day, knowing that your energy bills will once more come in under budget.

A fantasy? Perhaps, but not far from today's reality. At the core of this scenario lies the concept of "real-time" pricing, or RTP: that electricity can be bought, sold, and traded in a way that takes into account variations in cost related to time and location.1

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