Environmental Defense Fund Inc.

To understand the economic and environmental impacts of cost-reflective electricity pricing schemes related to distributed energy resources deployment

  • Amount $589,260
  • City New York, NY
  • Investigator Beia Spiller
  • Year 2017
  • Program Research
  • Sub-program Energy and Environment

Funds from this grant support a multi-institutional and multidisciplinary research project led by two economists at the Environmental Defense Fund (EDF) (Beia Spiller and Kristina Mohlin) working in collaboration with power systems engineers at MIT (Karen Tapia-Ahumada and Ashwini Bharatkumar) and regulatory analysts at New York University (Burcin Unel) to understand how alternative electricity rate designs might impact the reliability of electricity distribution grids. Many households face a fixed, per kilowatt hour rate from their utility for their electricity use—whether it is midnight in the winter (when overall demand for electricity is low) or whether it is late afternoon on a hot, sunny summer day (when demand is high). Some utilities, however, are experimenting with a host of demand-varying pricing schemes, so that consumers pay higher per kilowatt hour costs when demand is high. There are many versions of these time varying rate design schemes (real time pricing, time of use pricing, variable and critical peak pricing, etc.). By changing the economic incentives facing consumers, these policies could impact the introduction of various distributed energy resources on the grid. You may, for example, be more inclined to install solar panels on your roof to generate your own power on hot, sunny summer afternoons to avoid paying much higher electricity rates during those times. Spiller, Mohlin, and their team plan to expand existing engineering simulation models and then apply them to real world data supplied through a partnership with ComEd of Illinois. This will allow them to estimate how various dynamic pricing schemes would affect investments in solar panels and other distributed energy resources, and how the subsequent impacts such investments would have on pollution, electricity prices, and total system costs.

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