Due to a combination of technology advances and policy initiatives, wind and solar are now the fastest growing sources of electric power worldwide. This is great news for the climate, since it allows us to use less power from dirty fossil fuel plants. But it presents serious challenges for electric power markets. The wholesale price of electricity is increasingly driven not by the cost of buying fuel for power plants, but by the amount of infrastructure capacity that is available to move electricity around at any given moment in time. It is increasingly clear that we need to change how we charge people for electricity, if energy is nearly free, but infrastructure capacity is expensive.

The other interesting trend is that smart devices like thermostats, water heater controllers and EV chargers can increasingly respond to changing market signals. As a result utilities are increasingly interested to start charging people for electricity rates that vary throughout the day and from one location to another. At first glance this seems like a good idea, but if you dig a little further there are all sorts of problems that emerge when you try to get people and devices to respond to prices in the right way. And in the end, most people have better things to do with their time than to watch the price of electricity or fidget with complicated price settings on their thermostat.

A new article in The Electricity Journal, Electricity Rates for the Zero Marginal Cost Grid, co-authored by co-founder Paul Hines, argues for a simpler solution. Let people choose from a few easy-to-understand electricity subscription packages that allow people to decide the amount of power capacity that they need and the amount of automation that they can support in their home. Some might choose an “all-you-can-eat” package that would have a higher cost. Others could choose a more affordable package that includes smart devices, such water heater controls and smart thermostats, that help people to avoid expensive peak time electricity without the need for individual consumers to take any action. Packetized Energy’s virtual battery systems make it possible to offer this type of affordable flexibility.