The Green Market Revisited

Now is a propitious time to remind folks of a Tech Central Station article of mine from August 2002 on how market-based retail electricity pricing is good for consumers and good for the environment:

One of dynamic pricing’s most enticing long-run benefits is that it induces conservation. If it’s expensive to produce electricity in a peak hour and consumers face that price difference across a day, they have an extremely powerful incentive to shift their energy-intensive uses to non-peak hours. Price signals are the most effective way to encourage conservation and to get people to make informed choices about how and when they will use electricity. A strong economic incentive to conserve could limit or prevent blackouts. Dynamic pricing also helps us achieve our environmental goals, in two ways. First, seeing real price signals could decrease overall electricity use. Second, the higher prices in peak hours shift use away from peak hours, which decreases the need for backup generators and using older, dirtier power plants to meet the peak.