May 28, 2024 · 24m · catalyst
With Great Power: Why dynamic rates are gaining momentum
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In this episode of With Great Power, veteran energy economist Ahmad Faruqi joins host Brad Langley to examine how consumer behavior, distributed energy resources, and modern communication strategies are accelerating the adoption of dynamic electricity pricing.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
Shayle as informed peer 2.6 Guest teaching 4.0 Guest disagreement 1.0 Shayle pushing back 0.0
speaking balance: gold is Shayle, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:35 Dismissing academic jargon in rate marketing
Faruqi bluntly rejects complex industry terminology, stating that calling rates 'locational marginal cost real-time pricing' is guaranteed to fail with customers.
Hardest push from Shayle ▶ 19:05 Prompting guest to name failing utilitiesLangley nudges Faruqi out of safe generalities by explicitly asking him to put on his controversial hat and identify utilities that struggled.
Biggest teaching moment ▶ 7:20 Reframing heat pumps and TOU synergyFaruqi corrects the host's assumption that heat pumps are a natural fit for TOU rates, explaining they exacerbate winter and summer peaks unless paired with marginal cost pricing.
Shayle holds their own ▶ 12:14 Citing specific pilot successes across utilitiesLangley displays strong subject knowledge by detailing specific deployments at SCE, PG&E, and PSEG Long Island to challenge why widespread adoption remains stalled.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Shayle as informed peer | Guest teaching | Guest disagreement | Shayle pushing back | Why |
|---|---|---|---|---|---|---|
| California Energy Crisis and the Genesis of Dynamic Rates | 0 | 0 | 0 | 0 | Produced narrative introduction segment detailing the 2000-2001 California energy crisis and Ahmad Faruqi's early experiments with time-of-use rates. Monologue and documentary audio clips with zero interactive dynamic. | |
| Show Introduction and Ahmad Faruqi's Career Background | 3 | 4 | 0 | 0 | Brad Langley sets context on Faruqi's multi-decade career across several regions. Faruqi educates the host on why EVs, rather than smart meters alone, served as the true catalyst for customer engagement. | |
| Heat Pumps and the Case for Marginal Cost Pricing | 3 | 6 | 1 | 0 | Langley asks if heat pumps are the next killer app for dynamic pricing. Faruqi reframes the premise, explaining that heat pumps actually clash with peak TOU pricing and require separate marginal cost structures. | |
| Managing the Duck Curve and Shifting Peak Hours | 3 | 5 | 0 | 0 | Langley asks Faruqi to clarify the duck curve and define the precise distinction between static TOU and dynamic pricing. Faruqi offers clear technical explanations. | |
| Overcoming Utility Inertia and Moving Beyond Pricing Pilots | 4 | 4 | 2 | 0 | Langley cites specific utility examples like PSEG Long Island and questions industry sluggishness. Faruqi forcefully critiques utility inertia and calls for ending redundant pricing pilots. | |
| Marketing Smart Rates: Emphasizing Savings Over Penalties | 3 | 5 | 2 | 0 | Faruqi dismisses overcomplicated economic jargon like locational marginal pricing for retail customers and explains why overly sharp opt-out mandates trigger political backlashes. | |
| The Core Principles of Effective Dynamic Rate Design | 3 | 5 | 2 | 0 | Langley invites Faruqi to name utilities that have struggled. Faruqi provides an in-depth dissection of Puget Sound Energy's failed 2000s rollout caused by weak rate differentials. | |
| The Evolving Power Sector and the Imperative of Rate Reform | 2 | 3 | 1 | 0 | Concluding discussion on the future grid where Faruqi asserts that utilities failing to adapt to consumer DER preferences will face bankruptcy, ending on a collaborative note. |
Statements from this episode (11)
Faruqi: Electric vehicles, not smart meters, drove time-of-use rate adoption
“The change that came was through a technology. Not digital meters, but through electric cars. Electric cars, or EVs as they're called, were the defining moment. Customers finally realized That they can lower their charging cost if they just charge during the o…”
Faruqi: Time-of-use rates are a poor fit for heat pumps
“A heat pump, which is both an air conditioner in the summer and a heat source in the winter, will be running precisely when there is a peak situation in the summer or a peak situation in the winter. Actually, it will create a peak demand in the winter that cur…”
Faruqi: Net grid load impact of DERs remains uncertain
“Some of them will raise load growth, EVs and heat pumps certainly being those two. But then there are other DERs which will lower load growth, like energy efficiency, demand response, and certainly solar. So what will be the net effect of those is anybody's gu…”
Faruqi: Australia Introduced Afternoon Off-Peak 'Sponge Tariffs'
“In Australia, they have introduced what they call the sponge tariff, and it is basically the off-peak period is now in the afternoon as opposed to at night”
Faruqi: Solar generation will push electricity peak hours into late night
“The peak will keep on going into the later evening, early nighttime hours, and the off peak will be in the middle of the day when the sun is shining and you have a lot of solar generation, both supply side and customer side.”
Faruqi: Dynamic electricity pricing operates like Uber surge pricing during critical grid shortages
“Dynamic pricing says, well, but on a hundred to 200 hours of the year, the system, the power system has a critical condition. There might be outages because there's a shortage of supply, and therefore in those few hours, 100 to 200 hours, we have to have even …”
Faruqi: Utilities do not need pilots given 400 existing global trials
“Let's try to actually move to actual implementation, and my advice is you don't really need to do a pilot because we already have 400 pilots across the globe.”
Faruqi: Technical jargon like 'real-time pricing' is guaranteed to fail with customers
“Using terms like real-time pricing, terms like locational marginal cost real-time pricing, I mean, that's guaranteed to fail.”
Faruqi: Missouri rejected aggressive default dynamic pricing after political backlash
“One utility tried it. Actually, one state tried it with Missouri, and then they rejected it because of the political crisis that they were about to precipitate.”