Uniform Electricity Rates–Thailand discussion

In response to a discussion of the quest for uniform rates in Thailand, I asked:

How important are each of the causes of non-uniform tariffs? Generation including contracts? Transmission including line losses to remote areas? Density of customers along distribution lines? Knowing the answers to these questions can lead you to ways to create uniform tariffs.

In the US, the density of customers along distribution lines led the federal government in the 1930s to offer subsidized loans at very low interest rates to utilities that served rural areas. Most of these loans went to cooperatives. I understand that these loans were available to investor owned utilities, though with such severe restrictions that most investor owned utilities did not avail themselves of these government loans.

The rate design can impact the degree of non-uniformity. An area with low average consumption will need higher rates if the cost recovery is primarily in an energy charge, Bahts/KWH. A higher customer charge, Bahts/month for each customer for basic service, tends toward uniformity for such low use areas.

I later responded to further parts of the discussion with:

My question about the sources of non-uniformity of tariffs mentioned generation because some distributors of electricity have access to cheaper forms of generation, such as hydro plants, older fully depreciated plants, and a willingness to participate in load management.

In the US Northwest, the federal government built hydro facilities nominally dedicated to customers of government owned utilities and cooperatives. Customers of investor owned utilities were not allowed access to the output of these facilities. As fuel costs rose, the disparities because greater and Congress enacted an equalization plan where Bonneville provide some cheap energy to the investor owned utilities so that their residential customers could benefit. I don’t remember that exact details, but that provided some uniformity.

In some parts of the US, most of the generation is owned by investor owned utilities who sell electricity to government owned utilities and cooperatives on a cost based tariff. The tariff generally has a demand charge and an energy charge. The demand charge is based on the monthly maximum demand imposed by the buyer on the seller. Some of the buying utilities have implemented load management programs that clip their peak demand by interrupting consumer load for a few hours a month. The peak shaving efforts reduces the average cost of the buying utilities below the cost based rates of the selling utilities, leading to some non-uniformity in rates.

Integrating Wind and Electric Vehicles

I see two issues in regard to integrating renewable resources and electric vehicles, one physical and one financial.

Renewable resources and electric vehicles are both intermittent, requiring some sort of storage to get them to interact with the “normal” part of the grid.  There are many types of storage, including batteries, pumped storage, and load management.  I call load management storage because I can use the electricity now to heat water or I can store the hot water by having heated the water last night.  Perhaps one of the oldest forms of storage is the flywheel.  Think how essential the potter’s wheel is as part of the infrastructure used by a potter.  In essence, flywheels keep the electric system running in that the rotating mass of the generators and the motors are flywheels. When there is a shortage, energy is extracted from the flywheels/rotating equipment and system frequency declines. When there is a surplus, energy is stored in the flywheels/rotating equipment and system frequency increases.

We need more storage devices, such as flywheels built just to be flywheels instead of as part of a motor or of a generator. And we need to pay the owners of these storage devices for their use. Their use should be similar to the use of the flywheel aspects of the grid. When system frequency is increasing or is high, we want storage devices to be absorbing energy. When system frequency is decreasing or is low, we want storage devices to be discharging energy. The incentives for the storage devices to act like this should be low prices (or even negative prices) when the frequency is high and high prices when the frequency is low.

I wrote “Renewable Electric Power—Too Much of a Good Thing: Looking At ERCOT,” Dialogue, United States Association for Energy Economics, 2009 August, to report on the negative prices experienced by the wind farms in Texas, about ¼ of the month of April 2009. And electric vehicles have the additional potential issue of overloading distribution transformers, at least if they are allowed to charge on an unfettered basis. My “Dynamic Pricing: Using Smart Meters to Solve Electric Vehicles Related Distribution Overloads,” Metering International, Issue 3, 2010 deals with that issue.