Research on Real-Time Pricing of Electricity
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- Added:Thursday, May 13th, 2010
- Writer(s):A Kallio
- Publisher:Imatran Voima Oy
- Abstract:Finland has a two-step organization for distribution of electricity. Producers operate as wholesalers to the industry and to electric utilities, which distribute electricity to end-users such as households, public buildings, services and small-scale industry. The sales are based on public tariffs. There are some major pricing principles which have been generally approved in Finland. They have also been included in the national energy policy program. According to the matching principle, each customer pays for the cost he has caused. In the principle of cost nccurncy, tariffs must follow the famation of the produdion cost structure and time fluctuation. The major goals in pricing are to cover long-tern costs and to secure stable price development for electricity. Industry and electric utilities can supply their electricity by buying it from the five Finnish wholesalers and/or by investing in their own power plants. Imatran Voima Oy is the largest wholesaler in Finland with a market share of 42% of the total consumption. The wholesale pricing has to compete with the other alternatives of the wholesale astomer. Imatran Voima Oy's wholesale tariff system H/85 consists of three partial tariffs, each of which is divided into demand and energy prices. The partial tariffs have their cost background in the production structure of the company. The base tariff is based on hydro and nuclear power generation, the middle tariff on coal condensing power generation, and the peak tariff on the gasturbine power generation. The energy prices vary by winter and summer and by day and night. At present there are some 130 electric utilities in Finland. Practically all of them have joined the Association of Finnish Electric Utilities, which publishes distribution tariff recommendations. The major tariff types are general tariffs, time tariffs and demand tariffs. The general tariffs suit the smallest-scale consumers, such as households. The energy prices are the same all year round. The time tariffs are planned for middle-sized consumers, such as households with electric heating. The energy prices may vary by day and night and/or by seasons so that they are lower during the off-peak periods. The demand tariffs are planned for small industry whose amount of consumption and utilisation time of subscribed demand differ from those of other amsumen. The energy prices may be even 4-stepped and vary by winter and summer and by day and night. Each consumer may freely choose the tariff type which suits them best. Electric utilities are independent in their pricing. Their tariffs compete with the prices of other fuels like oil and gas. The wholesale purchases form about 60% of the total costs of an electric utility when it does not have any generation of its own, i.e. when it purchases all energy from a wholesaler.
- Tags:finland, pricing, Research, tariffs