What Is Dynamic Pricing?
Instead of charging a flat rate for energy consumption, dynamic pricing enable smart meters to take into account when the energy is being used as well as how much. The price then varies depending on the demand for energy at the time, with peak levels of demand increasing the price of energy. The pricing structure is used by the energy companies as an incentive for consumers to use less energy when the price (and the demand) is high, deferring their usage to times when it is cheaper. Simple Time-Of-Use (TOU) schemes achieve this by creating a simple demand-based price band structure – classifying periods of the day as off-peak, mid-peak and on-peak for example. The times of day which these bands occur on are fixed, so that consumers know the cost of using energy at any given time and can choose to alter their behaviour accordingly. Real-Time Pricing (RTP) offers another step forward in smart meter dynamic pricing, with prices altering on a systematic scheduled basis (e.g. hourly). The s
