Using Time-Varying Rates to Boost Renewables and Save Money

The document advocates for a transition from flat electricity rates to time-varying pricing to better align consumer demand with the availability of renewable energy. It details three primary rate structures—Time-of-Use, Critical Peak Pricing, and Real-Time Pricing—and explains how households can respond through discretionary shifts, interruptible loads, and energy storage. Using a pilot program from the Sacramento Municipal Utility District as a case study, the brief demonstrates that default enrollment in time-varying rates is more cost-effective and achieves higher aggregate savings than voluntary opt-in programs. The authors emphasize the need for transparent customer education, 'shadow billing,' and protections for low-income and vulnerable populations to ensure an equitable transition.

• Flat electricity rates obscure the dynamic costs of production and consumption, leading to an inefficient system where peak demand is met by expensive, polluting fossil-fuel plants that often remain idle for most of the year.
• Time-varying rates incentivize 'efficient' consumption by shifting electricity use away from periods of high pollution and cost toward times when clean energy resources, such as solar and wind, are most plentiful.
• There are three primary time-varying rate structures: Time-of-Use Pricing (predictable on-peak and off-peak periods), Critical Peak Pricing (high rates during a few extreme demand events per year), and Real-Time Pricing (highly dynamic rates that fluctuate in parallel with system costs).
• Residential demand flexibility can be achieved through three categories: discretionary changes (e.g., delaying a dishwasher), interruptible loads (e.g., cycling air-conditioner compressors), and energy storage (e.g., electric vehicle batteries and tank water heaters).
• A pilot program by the Sacramento Municipal Utility District (SMUD) showed that while opt-in customers achieved a higher individual demand reduction during peak periods (16.7% vs 5.8%), default enrollment resulted in significantly higher aggregate savings and was more cost-effective, with an estimated $34 million in net benefits compared to $5.5 million in net costs for voluntary enrollment.
• To ensure equity and prevent economic harm to low-income households, the elderly, or the chronically ill, utilities should implement safeguards that limit these vulnerable groups to paying no more than the previous flat rate for a transition period of one to several years.

APA

McNamara, J., Jacobs, M., & Wisland, L. (2017). Using Time-Varying Rates to Boost Renewables and Save Money. Union of Concerned Scientists. https://www.ucs.org/sites/default/files/attach/2017/01/Flipping-the-Switch.pdf

Chicago

McNamara, Julie, Mike Jacobs, and Laura Wisland. Using Time-Varying Rates to Boost Renewables and Save Money. Union of Concerned Scientists, 2017. https://www.ucs.org/sites/default/files/attach/2017/01/Flipping-the-Switch.pdf.

Wikipedia

{{cite report |last1=McNamara |first1=Julie |last2=Jacobs |first2=Mike |last3=Wisland |first3=Laura |title=Using Time-Varying Rates to Boost Renewables and Save Money |publisher=Union of Concerned Scientists |date=January 2017 |url=https://www.ucs.org/sites/default/files/attach/2017/01/Flipping-the-Switch.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mcnamara2017using, author = {McNamara, Julie and Jacobs, Mike and Wisland, Laura}, title = {{Using Time-Varying Rates to Boost Renewables and Save Money}}, institution = {Union of Concerned Scientists}, year = {2017}, month = jan, url = {https://www.ucs.org/sites/default/files/attach/2017/01/Flipping-the-Switch.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }