The Inefficiency Paradox of Peak/Off-Peak Energy Economics

During the day when energy is expensive, the owner of a hydroelectric plant lets a lake of water flow through his dam to generate power to sell at premium prices.

During off-peak hours at night, he might purchase energy from a cheap source and use it to pump his lake back above the dam so that the next day, he can use it to generate energy at premium prices again.

This is an extremely inefficient process since more energy is required to pump the lake up than it produces when it flows done (yet this process is still profitable for the owner because of the great disparity in peak/off-peak energy prices).

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~ by djstrouse on February 25, 2008.

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