How to Save Electricity at Home Through Time-of-Day Pricing

As many of us have noticed, utility companies are replacing flat-rate power pricing with time-of-day-based pricing models. For consumers, this new “time-variant pricing (TVP)” structure can be a good thing, especially when technology can help you save money.  Smart home automation systems can control when your dishwasher and clothes washer starts, for example, or can monitor the temperature inside your freezer or refrigerator and cycle those appliances less frequently.

But before you can save via TVP, you must understand it first. TVP pricing comes in many different forms, but the basic Idea is that pricing is cheaper during nonpeak hours. This is when your utility offers incentives to use power during non-peak hours.

At first glance, it may sound bad that prices are rising, but it can be a great benefit to those who use the system to their advantage.  Smart devices like a smart thermostat can help you avoid using big energy during peak hours, making sure you are only paying for energy at the cheapest time of the day.  In addition, green energy sources like solar and battery back-up systems can sometimes earn homeowners rebates for helping the utility lower the pressure on their grid.  In some cases, reduced stress on the energy infrastructure can result in lower costs for the utility company, which could pass those savings on to you.  A recent study by an Oklahoma power company found that if 20 percent of its users switched to time-variant pricing, it wouldn’t need to build a power relay station to keep up with demand. Moreover, that same utility found that clients who switched to TVP saved $200 per year in energy costs.

According to the Environmental Defense Fund, here are the 5 most common types of TVP:

Real-time pricing (RTP): Prices vary frequently over the course of the day to reflect fluctuating electricity costs.

Time-of-use pricing (TOU): The day is broken into two or three periods of time (e.g., peak period, off-peak period, interim period); prices vary by period, but remain consistent from day to day.

Variable peak pricing (VPP): Similar to TOU pricing, except that peak period prices change daily to reflect system conditions and costs.

Critical peak pricing (CPP): A critical event is identified when the price may increase dramatically to reflect system conditions.

Critical peak rebate (CPR): Similar to CPP, except that customers are paid for cutting back on electricity during critical events relative to the amount they normally use.

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