Demand Response | VaasaEtt Global Energy Think Tank

Households’ Self-Selection of a Dynamic Electricity Tariff

Offering electricity consumers time-differentiated tariffs may increase demand responsiveness,
thereby reducing peak consumption. However, one concern is that time-differentiated tariffs may also
attract consumers who benefit because of their consumption pattern, even without a corresponding
demand response. A discrete choice model applied to data from a residential dynamic pricing
experiment indicates that higher demand flexibility increases the propensity of a household to select
dynamic tariffs, while favourable consumption patterns do not influence the tariff choice. The offering
of dynamic time-differentiated tariffs is then likely to increase the demand response among
residential consumers.

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Households' Self-Selection of a Dynamic Electricity Tariff

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An Analysis of a Demand Charge Electricity Grid Tariff in the Residential Sector

This paper analyses the demand response from residential electricity consumers to a demand
charge grid tariff. The tariff charges the maximum hourly peak consumption in each of the winter
months January, February and December, thus giving incentives to reduce peak consumption. We
use hourly electricity consumption data from 443 households, as well as data on their network and
power prices, the local temperature, wind speed and hours of daylight. The panel data set is
analysed with a fixed effects regression model. The estimates indicate a demand reduction between
0.07 and 0.27 kWh/h in response to the tariff. This is on average a 5 percent reduction, with a
maximum reduction of 9 percent in hour 8. The consumers did not receive any information on their
continuous consumption or any reminders when the tariff was in effect. It is likely that the
consumption reductions would have been even higher with more information to the consumers.

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Market Based Solutions for Increased Flexibility in Electricity Consumption

The main focus of this paper is on manual and automatic
demand response to prices in the day ahead market. The
content is mainly based on the results and experiences from
the large scale Norwegian test and research project “End
User flexibility by efficient use of ICT” (2001-2004)
involving 10 894 customers with automatic meter reading
(AMR) and remote load control (RLC) options.
The response to hourly spot price products and intraday time
of use (ToU) tariffs were tested. The registered response
differs from 0.18-1 kWh/h in average per household
customer for the different combination of these price
signals. The largest response was achieved for the customers
with both the ToU network tariff and hourly spot price.
Some of the customers were offered remote controlled
automatic disconnection of water heaters in the high price
periods during week days. The test shows that the potential
of load reduction from water heaters can be estimated to
0.6 kWh/h in the peak hours on average. For Norway this
indicates that a total of 600 MWh/h automatic price
elasticity could be achieved, provided that half of the 2
million Norwegian households accept RLC of their water
heater referred to spot price.
The benefit for load shifting is limited for each customer,
but of great value for the power system as a whole.
Combination of an hourly spot price contract with an
intraday ToU network tariff should therefore be considered,
in order to provide stable economic incentives for load
reduction.
One potential drawback for customers with spot price
energy contracts is the risk of high electricity prices in
periods of lasting scarcity. Combination with financial
power contracts as an “insurance” for the customer is an
option that will be examined in a follow up project.

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Direct Load Control of Residential Water Heaters

In Norway there is a growing concern that electricity production and transmission may not meet the
demand in peak-load situations. It is therefore important to evaluate the potential of different demand
side measures that may contribute to reduce peak load. This paper analyses data from an
experiment where residential water heaters were automatically disconnected during peak periods of
the day. A model of hourly electricity consumption is used to evaluate the effects on the load of the
disconnections. The results indicate an average consumption reduction per household of
approximately 0.5 kWh/h during disconnection, and an additional average increase in consumption
the following hour, due to the payback effect, of approximately 0.2 kWh/h.

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The Value of Dynamic Pricing in Mass Markets

The simpler forms of dynamic pricing, in which prices vary only during extreme supply conditions, may capture many of the economic benefits of real-time pricing, and may be suitable for wide-scale deployment to mass-market consumers, for whom dynamic pricing options have large been ignored.

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Residential Response to Voluntary Time-of-Use Electricity Rates

The response of residential households to voluntary Time-of-Use TOU. electricity rates
is estimated using data from a recent experiment at Midwest Power Systems of Iowa. The
study’s design allows us to examine both the participation decision and the customer’s load
pattern changes once the TOU rate structure was in effect. Substitution elasticities between
on-peak and off-peak electricity usage are estimated and compared to those obtained in
earlier mandatory programs, indicating whether program volunteers are more responsive to
TOU pricing than the typical household. Attitudinal questionnaires allow us to examine the
role of usage perceptions in program participation.

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Residential Response to Critical-Peak Pricing of Electricity: California Evidence

This paper analyzes data from 483 households that took part in a critical-peak pricing (CPP) experiment
between July and September 2004. Using a regression-based approach to quantify hourly baseline
electric loads that would have occurred absent CPP events, we show a statistically significant average
participant response in each hour. Average peak response estimates are provided for each of twelve
experimental strata, by climate zone and building type. Results show that larger users respond more in
both absolute and percentage terms, and customers in the coolest climate zone respond most as
a percentage of their baseline load. Finally, an analysis involving the two different levels of critical-peak
prices – $0.50/kWh and $0.68/kWh – indicates that households did not respond more to the higher CPP
rate.

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Residential Implementation of Critical-Peak Pricing of Electricity

This paper investigates how critical-peak pricing (CPP) affects households with different usage and income levels, with the goal of informing policy makers who are considering the implementation of CPP tariffs in the residential sector. Using a subset of data from the California Statewide Pricing Pilot of 2003-2004, average load change during summer events, annual percent bill change, and post-experiment satisfaction ratings are calculated across six customer segments, categorized by historical usage and income levels. Findings show that high-use customers respond significantly more in kW reduction than do low-use customers, while low-use customers save significantly more in percentage reduction of annual electricity bills than do high-use customers – results that challenge the strategy of targeting only high-use customers for CPP tariffs. Across income levels, average load and bill changes were statistically indistinguishable, as were satisfaction rates – results that are compatible with a strategy of full-scale implementation of CPP rates in the residential sector. Finally, the high-use customers earning less than $50,000 annually were the most likely of the groups to see bill increases – about 5% saw bill increases of 10% or more – suggesting that any residential CPP implementation might consider targeting this customer group for increased energy efficiency efforts.

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