Conventional demand curves slope downward – when the price of something decreases, the quantity demanded increases. The electricity demand curve however, goes the other way. The thing is, it does not have to be that way. If you can change the direction of a consumer’s electricity demand curve, you create an economic opportunity for that consumer. Understanding this curve therefore is key to disrupting the electricity market.
So why does electricity demand slope upward?
A few reasons.
First, electricity is dispatched based on the lowest marginal cost i.e., the cheapest power gets produced and sent out to the grid first. This is because every extra unit of power requires resources that are increasingly expensive. Coal-powered electricity goes first, then hydro, nuclear, gas and so on. So, as consumers use more power, they are buying increasingly more expensive power.