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Smart Grids: An Approach to Dynamic Pricing in India

This report develops an approach to dynamic pricing in support of the Ministry of Power (MOP) initiative for smart grid pilot projects in India. Dynamic pricing experiments are intended to reveal how consumers respond to electricity prices and identify the most promising mechanisms suitable for wide-scale deployment. Traditional electricity rate structures do not reflect the cost difference of supplying electricity in peak versus off-peak hours. Therefore, the customer has no market incentive to adjust their pattern of electricity consumption. Dynamic pricing options such as time of use (TOU), critical peak pricing (CPP), critical peak rebate(CPR), real time pricing (RTP), and variable peak pricing (VPP), that reflect time-varying cost of electricity supply, have been in use worldwide to encourage peak load management and demand reduction.

This is prepared under Partnership to Advance Clean Energy - Deployment  (PACE - D) Technical Assistance Program.