Managing the Benefits and Costs of Dynamic Pricing in Australia
Prepared for The Australian Energy Market Commission (AEMC)
In this paper we discuss ways of managing the benefits and costs of dynamic pricing in Australia. Specifically, we discuss four different types of time-varying electricity prices: Real-Time Prices (RTP), Time-of-Use rates (TOU), Critical Peak Pricing (CPP) and Peak-Time Rebates (PTR).
RTP requires setting prices on a short-term basis to reflect current market conditions, either on a dayahead basis or an hour-ahead basis. TOU rates divide the day into several pre-determined price periods, each with a pre-determined price. Prices may also vary seasonally across the year. CPP increases electricity prices during the hours that fall into critical peak pricing events called by the utility or retailer and decreases them during all other hours of the year. PTR does not change the price of electricity during any time period but offers customers a rebate on electricity conserved during the hours of the critical peak pricing period.
