Sunday, 28 February 2010

Paying for Power

Being an evil genius, I'm obsessed with getting as much power as possible. If only I could get power for nothing, but alas, I have to pay for it.

In England, and most of the western world, we have a well established system of sending electricity from the power stations to me and sending money in the opposite direction. It works, but I think we can improve on it.

An Electron's Journey

Electricity starts life at the power stations. They sell their power supply on the grid at market rates, competing with other power stations. The price of electricity fluctuates over the day. If the price goes down far enough, they might switch off the generators, keeping their raw materials for when the price goes up. A wind farm can't keep stocks of wind in reserve, so they will stay online all the time regardless of the price.

We, the public, never see those fluctuations in price. Instead, we purchase electricity from a supplier who deal with the power stations. The suppliers usually charge us a fixed amount per unit of energy, sometimes having a daytime rate and an overnight rate, but the price they charge us is fairly stable, only changing the rates every few months.

(As well as the suppliers, we also pay the companies that maintain the grid system and meters in our homes. This article is not about them.)

When all is said and done, what do the suppliers actually do? They don't generate the electricity and they don't bring it to us. They are middle-men who flatten out the price, charging a bit more than the expected average price, like an insurance premium, to compensate for the risk of over-demand and price rises. Do we need that service? We have insurance to spread the risk of unexpected events, not for the everyday costs of life.

What if, instead, we had a minimal supplier that just handles the accountancy at a low cost, quoting a price that changes every five minutes, tracking the wholesale price. (Perhaps having an easy to use gizmo that displays the current price.) With this type of supplier, we would probably save money over the long term. After all, we wouldn't be paying that insurance premium any more.

But more important than that, it would give us an interest in when we use electricity. At the moment, we really don't care that the price of electricity rises dramatically during the adverts on popular TV shows. We all switch on our kettles at the same time, not really caring about the economics. If we felt the rise in price, we might plan our tea making better to avoid these peaks and save some money.

This plan wouldn't have worked when the grid was originally built, but computer and communications technology have advanced to point where we can finally think about pulling down the old ways of working. I'm looking forward to it.

Picture credits.
Nuclear power by koert michiels on flickr.
insurance prohibits ladders by stallio on flickr.

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