Sep 4, 2024 · 49m · green-blueprint
Frontier Forum: How rates will make or break the energy transition
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Host Stephen Lacey and energy experts Ahmad Farooqi and Scott Engstrom explore how modernizing electricity rate design and deploying dynamic, customer-centric pricing are critical to achieving a reliable clean energy transition.
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 →
The hosts as informed peer 3.4 Guest teaching 3.4 Guest disagreement 2.9 The hosts pushing back 1.9
speaking balance: gold is the hosts, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 41:05 Farooqi attacks utility decoupling mechanisms
Farooqi dismisses traditional utility revenue models as a regressive shell game that penalizes conservation by raising base rates.
Hardest push from the hosts ▶ 25:51 Lacey pushes guests to identify failed utility programsLacey refuses to let the guests stick to polite generalizations, prodding them directly to name specific utility programs that failed.
Biggest teaching moment ▶ 17:35 Farooqi demonstrates mathematical reality of price elasticityFarooqi cites empirical data from 400 global implementations to prove that minor 20 percent differentials produce zero customer behavioral change.
The host holds their own ▶ 44:59 Lacey directly addresses Farooqi's stance on dynamic pricingLacey demonstrates domain knowledge by anticipating Farooqi's specific reservations about real-time pricing compared to Engstrom's optimistic outlook.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The hosts as informed peer | Guest teaching | Guest disagreement | The hosts pushing back | Why |
|---|---|---|---|---|---|---|
| Provocative Takes on Rate Complexity and Utility Mindsets | 4 | 3 | 4 | 2 | Lacey invites both guests to share provocative stances on utility rate design. Farooqi delivers an aggressive critique of utility accountants and regulators designing rates in insular echo chambers without customer awareness. | |
| Defining Rate Structures and Shifting to Customer-Centricity | 3 | 5 | 3 | 1 | Lacey asks foundational questions clarifying terminology between dynamic and time-of-use rates. Farooqi and Engstrom educate on the structural transition from traditional cost-of-service accounting to modern customer-centric models. | |
| Evaluating Time-of-Use Efficacy and Price Differentials | 4 | 4 | 3 | 2 | Lacey introduces skepticism about whether simple TOU rates actually justify their implementation costs. Farooqi presents empirical findings from 400 global deployments demonstrating that timid price differentials fail to change customer behavior. | |
| Case Studies of Success and Failure in Rate Implementation | 4 | 5 | 3 | 3 | Lacey presses both guests to name specific examples of successes and failures across utility territories. Farooqi and Engstrom contrast successful models like SMUD and OG&E against poorly structured rollouts in the Pacific Northwest. | |
| Virtual Power Plants and Marginal Electrification Rates | 4 | 4 | 4 | 2 | Lacey steers the discussion into expanding options such as virtual power plants and electrification tariffs. Farooqi sharply criticizes utility decoupling as a shell game protecting legacy business models rather than facilitating net zero goals. | |
| Real-Time Pricing, Automation, and Regulatory Reform | 5 | 3 | 3 | 3 | Lacey questions the viability of real-time price automation and specifically highlights Farooqi's known skepticism. Farooqi and Engstrom discuss consumer automation guardrails and call for regulatory willingness to accept experimental failure. | |
| Concluding Remarks and Audience Resources | 0 | 0 | 0 | 0 | Stephen Lacey delivers closing remarks, directs listeners to full webinar recordings, and provides concluding housekeeping details. |
Statements from this episode (17)
Engstrom: Decarbonizing energy requires grid operators to secure demand-side flexibility
“Taking carbon out of the supply of energy will only work if grid operators have the flexibility with respect to demand to meet this new supply stack that, that utilities are building.”
Farooqi: Net-zero is "dead on arrival" without active customer participation
“Without customer involvement, this net zero business is dead on arrival.”
Engstrom: Aggregators will shield consumers from increasingly complex wholesale electricity rates
“I think that rates are both, both going to get much more complex and much more simple. I think what's going to happen ultimately is you will have Some disintermediaries or what they're called aggregation service providers, ASPs, that will be sophisticated enou…”
Farooqi: Most utility time-of-use rates enroll only 1-2% of customers
“We have seen a lot of interesting attempts to innovate rates over the last two decades, and a lot of them unfortunately fall in the category of doing a checklist. Oh, we're going to offer a time of use rate, but we don't know how to design it properly so custo…”
Engstrom: Residential electricity customers buy convenience, not commodity electrons
“Residential customers who, you know, ultimately I believe don't think they're buying electrons from their utility. They're buying convenience. I come home. I turn on my lights. I turn on my air conditioner. It works. They're not thinking about how much am I pa…”
Farooqi: Outside retail aggregators understand customers far better than regulated utilities
“These companies understand customers a hundred times better than regulated utilities. They have come in from the outside. They know how to talk and communicate to customers and do the pricing in a way that the customer says, oh, I see, this will lower my bill,…”
Farooqi: Data from 400 implementations links higher savings to greater peak reduction
“The data that Scott was referring to that I had developed in my previous career we had data from 400 implementations of time varying rates across the globe. And what we found was that the bigger the savings opportunity, the more will be the reduction in peak l…”
Farooqi: Poor marketing will kill even the best electricity rate design
“As I said, you can have the best rate design and market it poorly, and nobody will take it. And you're going to have the worst rate design and market it effectively, and everyone will take it.”
Farooqi: Utilities should market dynamic pricing around savings, not peak penalties
“Why, why lead with the higher price? Lead with the lower price. I mean, that's like marketing one A, right? But we somehow, because of the cost of service mindset, can't seem to understand it. But all of us, our customers who go to Macy's, Nordstrom's, and Saf…”
Engstrom: Over 60% of US customers have TOU access, under 10% enroll
“So we know just across the country that today, well over 60% of customers could be
Enrolled in a time for use rate, but there's only about seven or, you know, less than 10% are enrolled.”
Farooqi: SMUD achieved 97% TOU enrollment and 4-8% peak reduction
“They have 97% of the customers on their default TOU rate. Peak reduction of four to eight percent has occurred, which is very consistent with our database.”
Farooqi: The three key drivers of failed utility rate programs
“And so long peak periods, insufficient price differential, and bad marketing, those are the hallmarks of failure.”
Engstrom: SCE measured 75 MW peak load reduction via TOU during 2022
“Southern California Edison, we worked with they measured on one peak day, The price signal to time of use customers, this is one of the heat storms in California in August, September, I think, of twenty-twenty-two, but they measured 75 megawatts of load reduct…”
Farooqi: Voluntary grid alerts lose impact without tangible financial incentives
“See, the problem with alerts is they only work a few times. Then it's like the, you know, the kid who cried wolf doesn't have an impact. You have to make it tangible by giving them a monetary payment or charging a higher price.”
Engstrom: Utilities will increasingly adopt device-specific rates for heat pumps and batteries
“We will see a more abundance of technology-specific rates. I'm thinking about heat pumps, batteries. Certainly we have EV rates are quite ubiquitous at this point.”
Farooqi: Oklahoma has run price-to-device thermostat programs for a decade
“A good example of that actually goes back a few years to Oklahoma again. They have prices to devices for 10 years now with their dynamic pricing program. What they do is they send a price signal directly to the thermostat, but it is up to the customer to pre-c…”