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Report RSE 18002404

DSM: International benchmark on the electrical rates systems



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P. Morabito (RSE SpA)

GESTDOMANDA 2017 - Demand Side Management

The reports describes the different electrical rates systems aimed to mitigate the peak load and to reduce the demand o f electrical energy.

Italy is among the leading countries that have achieved high levels of energy efficiency. From one hand,this is considered as a gratifying result coming from the policy of energy efficiency carried out in thecountry, on the other hand it is to point out that the further margins of energy efficiency could belimited, expensive and of more complex realization.

In general, the Demand Side Management (DSM) and, more in detail, the use of subsidizing energyrates are considered to belong among those actions of more complex realization to achieve furtherresults of energy efficiency.

Among them, the so-called “dynamic pricing” rates are included.
The adoption of “dynamic pricing” rates absolutely needs the deployment use of smart meters. Theirdeployment, associated to the joint enabling technology diffusion, is part of a more restrict typology ofDSM, known as Demand Response Management (DRM).

The main goals of DRM are:
− energy saving by the adoption of an aware consumption model of electrical energy;
− peak load mitigation by load-shifting;
− increase of network reliability;

There are two technologies by which the DRM can be implemented on the electrical network: directload control (DLC), intelligent load control (ILC). The DLC technique allows the utilities to have adirect remote access to some electrical loads of the customers. In this way such loads can be turned on oroff when needed. This technique can be enabled only in smart grids.

The ILC technique is based upon the adoption of time-varying electrical rates, also known as “dynamicpricing”.

There are four different electrical rates systems based on the ILC technique:
− Time-of Use (ToU) rates;
− Real-Time Pricing (RTP) rates;
− Inclining Block Rates (IBR);
− Peak-Time-Rebate (PTR) rates.

The ToU rates consist in a time-variation of the price of energy during the day, according to the type ofweekly or seasonal day. Each day is divided into time periods (usually hours) and for each period a longterm scheduled rate is applied. Low rates are applied during holiday day and non-working day. The ToUrate are usually offered in connection with a Critical Peak Pricing (CPP) system consisting in applying avery high level of rate for a short time when cost of generating or purchasing electricity are very high orat times of shortage or peak demand. Customers are notified in advance of a CPP event and the numberof events per year is usually fixed.

Also the RTP rates consist in a time variation of the price of energy during the day but, differently onthe ToU rates, the prices variation are determined according to the electricity market sessions. As aresult, the RTP rates reflect the real-time costs of generation and purchasing of electricity. Price signal isprovided to the user in advance, usually the day-ahead.

The IBR rates are based upon the amount of consumption of the consumer: a user pays more whenconsuming more energy. The system foresees a multi-threshold (usually two) rate structures accordingto which the price of energy increases sharply if energy usage exceeds each threshold. The mainobjective of the IBR rates is to reduce the unneeded consumption of energy.

The PTR rates foresee that the user is paid for load reductions in respect to what they would haveotherwise consumed during critical peak events. The PTR rates subsidize to reduce the consumptionduring the peak load, in the same way as CPP rates.

The experience gained from some countries that have applied the “dynamic pricing” systems havepointed out that:
− the ToU rates allow the consumer to reach a yearly energy cost saving of the order of 10%;
− the PTR rates enable to obtain a consumption reduction of 12% during the peak load;
− the RTP rates allow to increase the yearly cost saving of the consumer up to 15%;
− the degree of satisfaction of the consumer that has adopted the PTR rates reaches the thresholdof 92%.

Finally, with the aim to further reduce the peak load, a key role is played from the enablingtechnologies. Their diffusion, jointly deployed to a dynamic pricing system rate, allows to obtain a peakload reduction even twice what would obtain without the use of such technologies.

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