Smart Electricity Grid with Real Time Pricing (RTP): An Alternative to Fixed Electricity Pricing In the Ghana Electricity Market

Abstract

Electricity pricing has been identified as a major cause of the shortfall in power supply in Ghana. End user electricity prices are fixed for long period and do not reflect the marginal cost of generating electricity with a shift from hydro supply to thermal supply. Time varying electricity pricing (Real Time Pricing) RTP where retail electricity prices vary in real time is an alternative proposition to the fixed pricing system. This system ensures that supply is always equal to demand through a constant variation in price during peak and off peak periods with advanced metering systems that sends signals to consumers to alert them during periods of high prices and periods of low prices. A simulation model based on system dynamics methodology is developed to analyze the causal relationships between price variation and supply demand response. The central focus of the model is the price that is used to reason about the behavior of demand and supply in the electricity market of Ghana given different pricing mechanism. The model is further used to investigate the welfare benefits consumers and producers would drive with the implementation of a real time pricing system. The results of the study shows that RTP can be an effective mechanism to meet peak loads as prices are adjusted in real time to cover the cost of electricity supply. It also provides substantial benefits to electricity producers by reducing the cost of capital investment and operations and maintenance cost. The study however observed that to maximize the benefits to consumers there is the need to shift from cost intensive sources of electricity supply such as gas powered thermal plants to cheaper renewable sources of electricity with storage units that would serve as backup systems.