Electricity: Getting the timing right

Source: The post is based on the article “Electricity: Getting the timing right” published in “Business standard” on 3rd August 2023.

Syllabus: GS3- infrastructure (energy)

News: In this article author is discussing a new electricity pricing system in India called Time-of-Day (ToD) tariff. This system changes prices based on demand, encouraging less use during peak hours. Smart meters are needed for this and could help manage renewable energy sources better.

What is Time-of-Day (ToD) tariff?

Time-of-Day (ToD) tariff is a system that changes electricity prices based on demand throughout the day.

During peak usage hours, electricity costs more. During off-peak hours, it’s cheaper.

The aim is to encourage consumers to use less electricity when demand is high.

This system is being introduced in India in 2024 for commercial and industrial users and in 2025 for other users.

ToD tariffs are already used in many countries, including the US, UK, and Japan.

For this system to work, smart meters are needed to track electricity use every 15 minutes.

What are the benefits of Time-of-Day (ToD) tariff?

Shifts Demand: ToD tariff incentivizes consumers to use electricity during off-peak hours, reducing strain during high-demand periods.

Improves Grid Management: Helps in managing fluctuations in renewable energy sources like solar and wind.

Saves Money for Consumers: Those who adjust their usage to off-peak times can save money.

Supports Renewable Energy: India’s shift towards renewables benefits from ToD. For instance, using electricity during “solar hours” will be cheaper.

Helps Climate Goals: By optimizing renewable energy usage, India moves closer to its target of 65% energy capacity from non-fossil fuels by 2030.

Consumer Empowerment: Allows consumers to actively participate in energy decisions, rewarding those who adjust their consumption based on varying rates.

Boosts Renewable Integration: Encourages using more renewable energy when it’s abundantly available, aiding in grid integration.

What are the limitations of Time-of-Day (ToD) tariff?

Increased Complexity: ToD pricing makes billing more complicated. Consumers need to track their usage across different times.

Behavioural Changes Needed: Consumers must adjust habits, like when they charge vehicles or use appliances.

Higher Costs at Peak Times: If users can’t change their habits, they’ll pay more during peak hours.

Depends on Smart Meters: ToD’s success relies on the widespread installation of smart meters. India has a target of 250 million smart meters by 2026.

Possible Resistance: Not all consumers may be willing or able to adjust their usage patterns.

Storage Challenges: Renewable energy has storage issues, making constant supply hard, despite ToD incentives.