Operation
Electricity use can vary dramatically on short and medium time frames, and the pricing system may not reflect the instantaneous cost as additional higher-cost ("peaking") sources are brought on-line. In addition, the capacity or willingness of electricity consumers to adjust to prices by altering demand (elasticity of demand) may be low, particularly over short time frames. In many markets, consumers (particularly retail customers) do not face real-time pricing at all, but pay rates based on average annual costs or other constructed prices.
Various market failures rule out an ideal result. One is that suppliers' costs do not include all damages and risks of their activities. External costs are incurred by others directly or by damage to the environment, and are known as externalities. Theoretically the best approach would be to add external costs to the direct costs of the supplier as a tax (internalisation of external costs). Another possibility (referred to as the second-best approach in the theory of taxation) is to intervene on the demand side by some kind of rebate.
Energy demand management activities should bring the demand and supply closer to a perceived optimum.
Governments of many countries mandated performance of various programs for demand management after the 1973 energy crisis. An early example is the National Energy Conservation Policy Act of 1978 in the U.S., preceded by similar actions in California and Wisconsin in 1975.
Read more about this topic: Energy Demand Management
Famous quotes containing the word operation:
“Waiting for the race to become official, he began to feel as if he had as much effect on the final outcome of the operation as a single piece of a jumbo jigsaw puzzle has to its predetermined final design. Only the addition of the missing fragments of the puzzle would reveal if the picture was as he guessed it would be.”
—Stanley Kubrick (b. 1928)
“It is critical vision alone which can mitigate the unimpeded operation of the automatic.”
—Marshall McLuhan (1911–1980)
“You may read any quantity of books, and you may almost as ignorant as you were at starting, if you don’t have, at the back of your minds, the change for words in definite images which can only be acquired through the operation of your observing faculties on the phenomena of nature.”
—Thomas Henry Huxley (1825–95)