Industry Insights
The Power of Prices
November 19, 2014
It’s 3 p.m. on a warm summer San Diego afternoon. My south facing windows are hot to the touch, but the building air conditioning units efficiently maintain a comfortable temperature. Nevertheless, it’s now time to stretch my legs and breathe some fresh air.
I exit the front door of the building and turn right, following the path along the building through the shade. As I reach the end of the building, once again, I turn right and see a world without prices. That’s right, an electric vehicle with a long extension cord snaking its way into the building.
I can’t speak to the moral qualities of this picture. I do not know what the electric charging arrangement is between the car and building owner. Perhaps there is an agreement or charge back mechanism that allows this person to charge the EV in this manner. Or perhaps it’s just stealing. In fact, I technically don’t know whether or not the car is plugged in beyond the locked mirrored doors.
But, I do consider the economics of this picture and wonder. For the past couple years, utilities have explored time-of-use rates, EV rates, and EV load shape impacts. In all those studies, price is assumed to change customer behavior leading to higher off-peak usages. Yet, sitting before my very eyes is a prime example of what happens in a world with incorrect price signals (whether incorrect, hidden, or ignored). Without an appropriate price signal (or maybe you just don’t care about the cost), the rational thing to do is charge your car during the peak hours just in time for the commute home. As forecasters, let’s hope they get the price signals correct.
I exit the front door of the building and turn right, following the path along the building through the shade. As I reach the end of the building, once again, I turn right and see a world without prices. That’s right, an electric vehicle with a long extension cord snaking its way into the building.
I can’t speak to the moral qualities of this picture. I do not know what the electric charging arrangement is between the car and building owner. Perhaps there is an agreement or charge back mechanism that allows this person to charge the EV in this manner. Or perhaps it’s just stealing. In fact, I technically don’t know whether or not the car is plugged in beyond the locked mirrored doors.
But, I do consider the economics of this picture and wonder. For the past couple years, utilities have explored time-of-use rates, EV rates, and EV load shape impacts. In all those studies, price is assumed to change customer behavior leading to higher off-peak usages. Yet, sitting before my very eyes is a prime example of what happens in a world with incorrect price signals (whether incorrect, hidden, or ignored). Without an appropriate price signal (or maybe you just don’t care about the cost), the rational thing to do is charge your car during the peak hours just in time for the commute home. As forecasters, let’s hope they get the price signals correct.