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What is load pricing?

A-Level, IB
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Last updated 7 Jan 2023

Load pricing is a pricing model that is used to determine the cost of energy at a specific time, based on the demand or "load" on the electric grid.

The higher the demand for electricity at a given time, the higher the price will be. Conversely, the lower the demand, the lower the price will be.

This load pricing model is used to encourage consumers to use electricity during times of lower demand, which can help to reduce strain on the electric grid and keep costs down for all consumers.

Here are a few examples of how load pricing may be used:

  • Time-of-use pricing: Under this pricing model, electricity costs more during times of high demand (such as weekday evenings) and less during times of low demand (such as overnight). This can incentivize consumers to shift their electricity use to off-peak hours.
  • Real-time pricing: Under this pricing model, the cost of electricity is constantly fluctuating based on the current demand on the grid. Consumers may be able to save money by using electricity when demand is low and prices are low, but they also risk paying more if they use electricity when demand is high and prices are high.
  • Critical peak pricing: Under this pricing model, electricity costs more during certain times of the year when demand is typically high (such as during heat waves). This can help to reduce strain on the grid during times of peak demand and prevent power outages.

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