Consumption and production are both inelastic and storage costs are high.
Traditionally when a producer produces more of a good than consumers want to buy, the price drops, consumers buy more, and producers produce less. If consumption & production are both inelastic, consumers won't buy more and producers can't produce less. The excess goes into inventory, where it's treated as an asset and then sold (often at lower prices) when supply and demand equilibrate.
You can't put electricity into inventory, at least not without batteries or similar tech, which cost money and leak charge. Hence, if you produce extra, you have to pay someone to manage the storage or usage of that extra current.
There are a few other industries that function like this. Garbage is a big one: you have to pay someone to take your garbage because demand for garbage is much less than supply and storage has non-zero cost.
> Consumption and production are both inelastic and storage costs are high.
Consumption is inelastic because the electricity rates are fixed 24/7. Allow variable pricing based on supply, and you'll see very elastic behavior.
For example, people will charge their car batteries when the rates are cheapest. Same for running the electric hot water heater, and the A/C, refrigerator, etc.
I'd say it's more "slightly elastic" than "very elastic". A lot of people won't spend the mental energy to optimize anything more than the most major consumptions, and even then most of what they can do is rearranging loads, not reducing them.
It's not about reducing them, it's time-shifting them. The big electric consumers are A/C, heating, refrigeration, hot water heating, and car battery charging. All of those are very amenable to time shifting, and this shifting can be automated.
That's an interesting idea. The current residential home appliance setup is totally not amenable to it - I don't even know where my refrigerator & hot water heating on-switches are, I rarely touch the A/C & heating, and I'm certainly not going to remember the rates at a give time of day as a consumer (I likely wouldn't even be home or awake when they're lowest). But if rates actually varied throughout the day, I could imagine smart-thermostats and smart-switches being a very lucrative new market. Manufacture a piece of silicon & copper and it saves you a hundred dollars a month in electricity; I like the idea.
I'm on a time-of-use tariff, and I use the timer on my washing machine to have it finish just before the end of the very cheap overnight rate. That alone has made a pretty big difference.
You bet. There'd quickly be add-ons to adapt existing systems to do this, and powerful incentives for the manufacturers of those systems to bring out new designs to take full advantage.
My electric bill is hundreds of dollars a month. Cutting it in half would be very motivating to me to buy new systems.
I would only categorize car battery charging as very amenable to time shifting, and the various kinds of heating and cooling as slightly to moderately amenable.
With refrigeration especially, you want to keep it in a very narrow temperature band. You could design a fridge that keeps an ice reservoir worth several hours, but without that you have very little ability to time shift.
With minor engineering changes, you can timeshift quite a bit.
Consider hot water heaters. When power goes out, mine will keep water hot enough for a shower for 2 days. Two days. That means the design can be changed to heat water up to, say, 200 degrees, and then mix it with cold water to bring it down to 100 or so when demanded, and one should never need to run the heater more than a couple hours a day when power is cheap.
Storing hot and cold water can also timeshift heating/cooling your house with a simple and inexpensive system (little more than a controller and a water tank). Much, much cheaper than battery storage.
Mix-down hot water heaters have been a thing since I've been alive (read: any commercial building) - it's not new or strange tech, just find a competent plumber and be willing to pay triple. Or DIY if you're that sort of guy - it's not exceedingly difficult.
If I were building a home today I'd "fake" this by simply using a standard tank water heater overspec'ed for my usage, heat that only with solar power on a intermittent basis, and put a tankless water-heater in-line for when/if the temp from the boiler gets too low. I've seen this implemented in more than a handful of higher end new construction myself and it seems like the least hacky/most supportable-by-mortals means of accomplishing it in the typical home.
BTW, people often asserted that demand for gas is inelastic. There's plenty of evidence it is very elastic - just the constant variation of pump prices is a sure sign of demand and supply being constantly adjusted.
And fuel economy most definitely affects peoples' choices in cars.
That's a much longer term elasticity. That's equivalent to flat-out raising electric rates and having people deal with hotter temperatures inside. That elasticity already exists, for the most part. Variable pricing probably doesn't get you a lot more of it.
I lived through the gas crisis. People were able to instantly change their use of gas to adapt. A simple example: people no longer drove to the store to buy a loaf of bread. They shifted to one trip and buying several days worth. They started carpooling. They started tuning up their cars (an ill-tuned car can be very inefficient).
My point is that they didn't start changing their behavior back and forth multiple times a day. They tightened their belts as much as they could, and kept them tight.
At the instant where there's too much electricity on the grid and too few people using it, that electricity has negative value too. And you can't store it (without paying somebody) till some later instant.
Traditionally when a producer produces more of a good than consumers want to buy, the price drops, consumers buy more, and producers produce less. If consumption & production are both inelastic, consumers won't buy more and producers can't produce less. The excess goes into inventory, where it's treated as an asset and then sold (often at lower prices) when supply and demand equilibrate.
You can't put electricity into inventory, at least not without batteries or similar tech, which cost money and leak charge. Hence, if you produce extra, you have to pay someone to manage the storage or usage of that extra current.
There are a few other industries that function like this. Garbage is a big one: you have to pay someone to take your garbage because demand for garbage is much less than supply and storage has non-zero cost.