Dynamic pricing is political

Recently, the director of the Dutch national railway company NS asked its passengers - those going to school in particular - to help deal with an impending temporary shortage of seats in trains by shifting their mobility patterns away from peak hours. ‘A step back in time’, seemed to be a common opinion reported in the news and found on social media. How dare a mobility service provider request the voluntary assistance of paying customers, at the cost of their comfort, as a result of to its own mismanagement?

A parallel to the energy sector, fair or not, is easily drawn. 'Energy demand flexibility is an economic value', concluded a recent report by TNO, signalling a renewed frantic search for flexibility in the energy sector to cope with increasingly intermittent energy supply and rising peak demand. Industry as well as consumers can and should be involved more in co-managing the grid by making their energy demand more flexible; business-cases should be explored, argues the report. If the right financial incentives are installed, households can help to balance the energy grid by consuming energy at the appropriate times. The smart grid, with its smart meters and home energy management devices, presents itself as the solution as the infrastructure by which flexibility in the energy sector can be enabled, guaranteed and organised. But what are the political implications of this flexibility to households? Can we expect a similar public outcry if established patterns of daily life are challenged?

I believe it is important to politicize interventions in collective energy rhythms. The core of my argument is that these interventions have proven to be politically sensitive (for example, in the US) and, as a result, are subject to competing discourses. Smart grids are currently being designed in some collaboration with household consumers, but a public debate is as of yet lacking. Dynamic pricing (of the real time variety) constitutes a key shift away from ‘energy is always available’ to ‘energy has a rhythm too, to which we have to attune’. In a recent group discussion with smart grid pilot project participants the topic of energy rhythms raised interesting questions. Will dynamic pricing mean that households will have to pay for the comfort of the daily rhythms they are used to?

Competing discourses on flexibility through demand side management could take shape along the following lines:

Dynamic pricing as…

  • …a fair incentive structure stimulating and rewarding efforts made for a public cause vs. an unequal reward scheme messing with progressive energy pricing and favoring residents of larger houses or with poor energy labels;
  • …an opportunity for everyone to cut down on the energy bill vs. a new chore the rich have the privilege not to be bothered with;
  • …attuning to natural (solar, wind) and societal rhythms vs. slacking our control over nature to the detriment of our quality of life;
  • …involving consumers in grid management to reduce public costs vs. grid operators passing on grid management responsibility to taxpaying consumers;
  • …part of the ‘smart’ package deal aimed at increasing the visibility of energy to consumers, hopefully increasing energy conservation efforts vs. preoccupying consumers with demand shifting while their efforts could better be spent improving insulation, investing in solar panels, etc.

In other words: dynamic pricing can be framed as progress or as a misguided effort.   

In the grand scheme of things, adjusting (minor parts of) daily activities seems like a small price to pay for a more sustainable energy sector. Demand side flexibility schemes have been implemented in the past, and are still in effect in across Europe, ranging from day-night tariffs in The Netherlands to an elaborate program in France.

But concerns regarding the equity, inclusiveness and effectiveness of dynamic pricing, even if small or uninformed, should not be covered by the warm technocratic blanket of smart grid discourse. Instead, the political dimensions of this pervasive innovation in flexibility governance should be addressed in a non-technocratic manner. A public debate on interventions in collective energy rhythms is necessary not only to ensure greater acceptance of these interventions, or to enhance participation of households in timing of use schemes, but also to explore and properly address equity, inclusiveness and effectiveness concerns about smart energy systems in general.