# Differential tariff

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Differential tariff

Differential tariff is an example of demand side management where the price per unit of energy varies with time.

## Background

There are several reasons why utilities manage demand through special programs. The utilities' reaction was the introduction of demand side management programs to overcome these problems. The concept of DSM program in power systems is to bring both supplier and consumer around a common platform for effective utilization of available energy with minimum inconvenience and maximum profit. DSM is a measure taken by utilities to influence the amount of timing of customer energy consumption in order to utilize energy resources most efficiently. These techniques are most useful in real time pricing environments. A large number of DSM techniques are available. Differential tariff or real time pricing is one such technique.

## Differential Tariff

To implement the above mentioned method of flattening the load curve, this technique is employed. As the variable load has some peaks and valleys, the supplier must install his equipment which will be capable of supplying the peak consumer load. During valley periods, the equipment will be underutilized, thereby decreasing the energy efficiency of the equipment. Hence the supplier will try to ensure equipment is utilized to its rated capacity for the entire duration whenever it is in the commissioned state. With this type of tariff, the consumer will try to consume more energy during valley periods by avoiding energy consumption during peak (expensive) hours.

## References

• P. Ravi Babu, et al. “Water heater Demand Side Management through Fuzzy Logic”, CISCON’ National Conference, Manipal Institute of Technology, Manipal 2-3 Oct-2006.

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