Distributed Energy Resources (DERs) consist of two types of resources. The first one is price-responsive demand, which is the original form of demand response. Some also call it the natural form of demand response. This includes peak clipping, load shifting, and valley filling.
The second one takes a different track. It takes the “negative demand” associated with peak clipping and load shifting and bids it into wholesale markets. This concept is gaining traction in several markets.
Time of Use (TOU) rates have been offered by utilities for a long time.[1] But they have gotten a “second wind” ever since customers started replacing their gasoline vehicles with electric vehicles (EVs).
For most customers, EVs represent a big load. An EV can add 25% to the load of a customer who consumes 10,000 kWh and 50% new load to a customer who consumes 5,000 kWh.
Without any incentive to charge their EV during the off-peak hours, customers may end up charging them during the peak period, forcing utilities to invest in expensive peaking power plants, and raise costs for all customers.
This can be avoided if customers are given a lower rate to charge during the off-peak period, which is exactly what a TOU rate is designed to do. It is analogous to Happy Hour pricing at restaurants, Matinee show pricing at movie theaters, and free street parking during the evening and nighttime hours.
Well-designed EV-friendly TOU rates typically feature three pricing periods: peak, mid-peak and off-peak. In these rates, the off-peak rate is noticeably lower than the existing average rate and it is substantially lower than the peak period rate.
The TOU rate can also include a critical-peak element on the top 10 days of the year, when supply shortages may occur. Alternatively, the TOU rate can be accompanied with a peak-time rebate.
Nevertheless, some analysts have voiced a concern that TOU rates, while avoiding creating a generation system peak, may end up creating a distribution system peak. They are recommending “managed charging.” A few pilots are being carried out with managed charging.
A few have gone a step further and are advocating that EVs serve as a generation resource and are keen on implementing “Vehicle-to-Grid” charging or V2G.
In this presentation I discuss the pros and cons of these two innovations. I also discuss what can be done to accelerate adoption of EVs in high-cost states like California and New York and in the New England states.
[1] https://www.publicpower.org/periodical/article/what-weve-learned-half-century-time-varying-rates.