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What's the rate structure to face the new challenges?

Rafael Herzberg's picture
Consultant energy affairs, Self employed

Rafael Herzberg- is an independent energy consultant, self-employed (since 2018) based in São Paulo, Brazil* Focus on C level, VPs and upper managers associated to energy related info, analysis...

  • Member since 2003
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  • Jul 26, 2021

What's the rate structure to face the new challenges?

Two right next door neighbors are families with two adults and two children.

They have another similarity: they consume the same amount of energy, 720 kWh/month.

Their most important difference lies in the water heating system. One has an electric 2 kW-50-gallon tank and the other three 6 kW-instant-tankless.

Their power bills are exactly the same (USD 94) because the rate is a fixed fee charge of 13 USD cents/kWh. But one demands (maximum recorded kWh/h) from the grid of 3 kW and the other of 12 kW.

It means that the (capital intensive) power supply chain (generation, transmission and distribution) requires expenditures for the tank-less home 4 times the one with a tank.

It is not right that both families should pay the same bill. 

If we take emissions and costs seriously, then the right thing to do is charging by kW capacity. As the world is changing to renewable energy, the most important cost driver is the capacity made available to the end users.

These are the benefits that will be on the table to be captured:

1) A drive to reduce the kW demand from the end user's prospective
2) Around the globe the installed generation capacity is about two times the recorded demand
3) By charging per demand, this installed capacity could be significantly reduced (end users would be naturally stimulated to retrofit)
4) Accordingly less emissions would be generated

It is a win-win.

If you would like to design this rate structure so as to consider it for your country, I am available to help you in this endeavor.


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Thank Rafael for the Post!
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