Brattle principals Ahmad Faruqui and Peter Fox-Penner were quoted in a Platts Megawatt Daily article on the reasons behind the lack of more widespread use of price-based demand response among utilities.
The article, “Experts see dynamic pricing as upgrade,” cites several reasons for the recent stall in growth of dynamic pricing, including the slow-changing nature of the electricity industry, consumers’ unfamiliarity with dynamic pricing technology, and the disconnect in jurisdiction between retail and wholesale energy markets.
Although there are many types of programs that reduce electricity demand, including load management and demand response, Dr. Faruqui believes that “natural” demand response, which occurs in response to dynamic pricing, is the best form of demand response. “Now that smart meters have been rolled out, there is no reason not to roll out dynamic pricing,” Dr. Faruqui explains.
Dr. Fox-Penner believes dynamic pricing will move steadily into the market. A recent analysis conducted by The Brattle Group for the Federal Energy Regulatory Commission found that under one scenario, more than 50% of demand response programs could be from dynamic pricing by 2019.