Proposing Dynamic Pricing as an Alternative to Improve Technical and Economic Conditions in Rural Electrification: A Case Study from Colombia

Abstract

Electricity access in rural areas is a critical challenge for global electrification. Most countries have focused on increasing electricity coverage without assessing the long-term sustainability of such solutions. To achieve sustainability in rural electrification solutions, it is necessary to consider five dimensions: technical, environmental, economic, social, and institutional. This paper reviews the state of rural electrification worldwide and proposes a dynamic tariff scheme that increases the technical and economic conditions of implemented solutions over an extended period. The proposed time-of-use (TOU) pricing methodology aims to flatten the system demand curve and utilize on-site renewable energy potentials. For the methodology’s evaluation, we analyzed a case study focused on electrification in isolated areas of Colombia, conducting a sensitivity analysis of user-behavior to the proposed tariff scheme using the concept of price elasticity of demand. We also evaluated the effect of the achieved demand curve flattening on the system frequency. The identified benefits highlight that an accurate pricing scheme can reduce the variation range in the system frequency. Furthermore, the evaluation results show that the implementation of the proposed tariff scheme has the potential to significantly flatten the demand curve and encourage the connection of non-conventional renewable sources to improve network conditions.

Methodological Proposal: First Steps for the Implementation of Demand Management Programs in Colombia

“…This flexibility allows changes in the demand curve through curtailments or load shifts, which lead to the impact of the long-term demand response being even greater [20]. This suggests that to reduce the price of electricity in the long term and to have a sustainable operation of a distribution network, it is necessary to start-up demand response programs as these are the ones that would allow to react to the realtime state of the distribution system and to make better use of the energy potentials of each region [21], [22].…”