Electricity pricing change for large Hawaiʻi businesses proposed
from UH News, Aug 29, 2024
A significant change to electricity pricing for large commercial customers in Hawaiʻi is being recommended by the University of Hawaiʻi Economic Research Organization (UHERO).
(TRANSLATION: Rate hike coming.)
A study, released August 27, recommends implementing a real-time pricing (RTP) tariff system. This approach would charge customers based on the hourly marginal cost of electricity production, a model known as locational marginal pricing (LMP). UHERO researchers say that this system could better manage grid demands, promote energy efficiency and fairly distribute costs among consumers.
(TRANSLATION: Rate hikes for daytime business users to be offset by rate cuts for 3AM users.)
According to the report authors Michael J. Roberts and Ethan Hartley, the system aims to reflect the true cost of energy production, including environmental and transmission expenses. The proposed tariff would combine variable pricing with a fixed charge to help cover infrastructure costs.
(TRANSLATION: You must rearrange your business schedules to accomodate intermittent wind and solar production--or else pay more.)
The new tariff would also let large customers build off-site solar and receive credit for generation at the locational marginal price. Because such facilities would likely be very profitable, the net benefits would be shared between energy-producing customer, other customers and Hawaiian Electric.
(TRANSLATION: Finance one of our windfarms and we'll go easy on you.)
The report suggests piloting the program with UH, before potentially expanding to other large commercial customers.
(TRANSLATION: Let's milk the UH budget first. Tuition hikes will cover it up.)
“As Oʻahu’s electric grid transitions to clean energy, characterized by variable wind, solar, and storage resources, the marginal cost of electricity will become increasingly variable across time and location,” according to the report. “Consequently, the value of using LMP for customer billing and compensating distributed generation will increase significantly.”
The proposal draws inspiration from Georgia Power’s long standing RTP model, but includes modifications for Hawaiʻi’s unique energy landscape.
As Hawaiʻi pursues its goal of 100% renewable energy by 2045, UHERO believes this pricing strategy could play a crucial role in managing the state’s evolving power grid and supporting the integration of variable wind and solar resources.
(TRANSLATION: You have to go through all these changes so we can squeeze a few more wind and solar projects into the grid. Some people actually believe solar is 'zero emissions' instead of being a really obvious example of 'moving the smokestack.')
PDF: View the full report on UHERO’s website.
UHERO is housed in UH Mānoa’s College of Social Sciences.
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IM: University of Hawaii Proposes Real Time Electric Prices Based on Marginal Costs | Ililani Media