Utility Pricing Metric Keeps Pace with Grid Modernization, New SGIP White Paper Explains

Utilities can determine the supply/demand balance that offers them and their customers optimum economic value

WAKEFIELD, Mass.— Dec. 12, 2016 – SGIP today released a white paper that will help utilities evolve their pricing models to accommodate smart grid technologies and offer higher quality services to their customers. The Economic Value of the Integration of Consumption Preferences in Electric System Planning white paper was written by industry leaders in the Home/Building/Industry-to-Grid Domain Expert Working Group from SGIP.

Historically, utility pricing has shaped demand behavior with tariffs that provide revenues to cover investments and operating costs plus an agreed return on assets. This paper proposes a more flexible metric for optimizing energy consumption and supply. This metric is based on a price that achieves supply/demand equilibrium. Using this metric, decision-makers can determine comparative economic values among energy alternatives.

“Smart grids bring new technological capabilities, but they also require business transformations,” said Aaron Smallwood, Vice President, Technology at SGIP. “This paper provides directions for new pricing models that could help utilities.”

With growing options for supplying electric energy, this new white paper can help utilities choose the options that provide the most economic value for them, and create pricing signals that are responsive to individual consumer needs.

“Utilities have typically used metrics based on tariffs that reflect supply-side capital and operating costs. This paper proposes a metric that mirrors open markets with price transparency to determine the economic value of various services. We have included insights and examples that explain how to achieve greater smart-grid efficiency through economic incentives,” said Dr. Kenneth Wacks, Chair of the Home/Building/Industry-to-Grid Domain Expert Working Group.

The Economic Value of the Integration of Consumption References in Electric System Planning white paper is available at no charge.

About SGIP
SGIP is an industry consortium representing a cross-section of the energy ecosystem focusing on accelerating grid modernization and the energy Internet of Things through policy, education, and promotion of interoperability and standards to empower customers and enable a sustainable energy future. Our members are utilities, vendors, investment institutions, industry associations, regulators, government entities, national labs, services providers and universities. As a nonprofit organization, we drive change through a consensus process. Visit www.sgip.org.

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