Utility Pricing in the Prosumer Era: An Empirical Analysis of Residential Electricity Pricing in California Felipe Castro and Duncan Callaway Energy & Resources Group University of California at Berkeley January, 2016

Distributed generation Prosumer? controllers Controllable devices Distributed generation home storage

Rate reform in California

Contributing to the policy debate Flat rate (FR) Time-of-Use Pricing (TOU) TOU + Critical Peak Pricing (TOU & CPP) TOU + Demand Charges (TOU & DC) Real Time Pricing (RTP)

Findings Mild efficiency gains from time-varying pricing. Bellow 2 dollars per month per household. Some households benefit up to ten time more than others, depending on their appliance stock and their geographic location. Time-varying pricing improves the economics of renewable technologies. This can translate into meaningful emissions reductions.

Peak-load pricing Price, cost           Quantity

Basic model  

Flat rate t   Constraints  

Time-of-Use t   Winter day Summer day Constraints      

Real Time Pricing t   Day 1 Day 2 Day 3 No constraints

Introducing heterogeneity and adoption Household in North California Household in South California Retail customers Array of technologies PV panel + storage Smart thermostat Smart thermostat + PV panel PV panel Tariffs Time of Use in PGE Time of Use in SCE

Generalizing rate structures Peak-load pricing demand-contingent fee Generalized demand-contingent fee     hourly consumption hourly consumption + other metrics hourly charges hourly charges + additional charges

Long-run equilibrium: Heterogeneity  

Long-run equilibrium: Generalized fees    

Modeling California’s electricity sector Network model of the Western Interconnection with 240 nodes Supplement the network with a model of the California residential sector Split population into four groups Homeowners / renters Have central air conditioning / do not have Supplement the data set with meteorological information

Aggregated efficiency gains 15

Implications for different households % of the population % increase with respect to flat rate bill

On carbon emissions

Conclusions Combining a top down with a bottom up approach can provide new insights for rate regulation policy. Targeting different rates to different customers will likely be a better strategy than defaulting all households into Time-of-Use. Good rate design can also help with climate change mitigation efforts.

Appendix

Effect of renewables Figure 2. Expected annual changes in the pattern of spring net load (© 2012, California ISO). Source: Kristov, Lorenzo, and Stephen Keehn. “Chapter 11 - From the Brink of Abyss to a Green, Clean, and Smart Future: The Evolution of California’s Electricity Market.” In Evolution of Global Electricity Markets, edited by Fereidoon P. Sioshansi, 297–329. Boston: Academic Press, 2013. http://www.sciencedirect.com/science/article/pii/B9780123978912000110.

Network model 240 – bus network model Exogenous time series Avg. production MWh

Geographic locations of generating technologies biomass coal exogenous demand gas adv. CC gas adv. CT gas conv. CC geothermal hydro nuclear solar wind

Economic parameters of generating technologies

Household counts per block group and node Units per block group Units per node

AC ownership and temperatures Temperature and Solar production Households with AC Households with no AC Solar irradiance [kWh] Count Count Avg. temperature [°C]