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NC State Economist Mike Walden – “Dynamic Pricing of Electricity”

Mary:  This is Mary Walden with economist MW welcoming you to the economic perspective.  Today’s program looks at dynamic pricing of electricity.  Mike, most of us are used to paying the same price for each unit of a product we buy.  For example, if gasoline is priced at $3 a gallon, then we pay $3 for all the gallons we purchase.   But I understand this may not always be the case – and in particular – with electricity.  Please explain.

Mike:  Summary Answer

  1. Electricity is an odd product
  2. Difficult to be stored, so power companies much build to handle the largest usage
  3. But it can spread out usage, may be able to build smaller capacity and so save money
  4. Dynamic pricing is a way to do this – price charged for each kilowatt of electricity depends on when use it
  5. If use at peak usage – charged more
  6. Idea is to get people to voluntarily move their usage away from peak times, thereby reducing capacity needed
  7. So, using dishwasher at early am hours
  8. Will likely see more of
  9. I’m MW

Mary:  And I’m Mary Walden for the North Carolina Cooperative Extension Service