Managing Electricity Demand through Demand Charges for Industrial and Commercial Customers (original) (raw)

Exploring Implications of Capacity-Based Electricity Pricing for Peak Demand Reduction

2019

In the face of climate change, the UK has set concrete goals to decarbonise energy systems. Associated strategies include increasing electrification of residential heating and transport and the substitution of fossil fuel energy sources with renewables. These entail expensive infrastructure reinforcements to support increased peak loads. Energy demand management can help mitigate this anticipated load increase. Capacity-based pricing is a mechanism to incentivise energy demand management by charging for a maximum power draw as opposed to the volume of consumed energy. In this text we use a persona technique to study how user needs drive the typical energy services that compose the aggregate power draw in a family home. We use this to reflect on user feedback (obtained through a demand shifting workshop with 10 participants) to discuss the factors that would allow excessive power demand to be shifted away from peak demand times, thus reducing the maximum draw. Subsequently, the role ...

On Demand Response in Electricity Markets

2016

This dissertation studies two topics in Demand Response (DR) in electricity markets, with some discussion of retail electricity pricing more broadly. In each of these investigations we posit a model of a consumer, or population of consumers, optimizing their consumption decisions for their private benefit. The first investigation considers the profit maximization problem of a DR aggregator, and the second studies the welfare impacts of existing and hypothetical retail tariffs and DR programs, with a combination of theoretical analysis and simulation experiments. Part I provides a comprehensive introduction to the dissertation. Part II of the dissertation formulates and analyzes the profit maximization problem of an aggregator that owns the production rights to a Variable Energy Resource's (VER) output, and also signs contracts with a population of DR participants for the right to curtail them in real time, according to a contractually specified probability distribution. The aggregator is situated in a market environment in which it bids a day-ahead offer into the wholesale market, and is penalized for deviations of its realized net production-renewable energy bundled with DR-from that offer. We consider the optimization of the aggregator's endto-end problem: designing the menu of DR service contracts using contract theory, bidding into the wholesale market, and dispatching DR consistently with the contractual agreements. In our setting, DR participants have private information about their valuation for energy; and wholesale market prices, VER output, and participant demand are all stochastic, and possibly correlated. In Part III, we study the welfare effects of various dynamic electricity pricing schemes, including Real-Time pricing, Time-of-Use pricing, Critical Peak Pricing, and Critical Peak Rebates (referred to simply as "Demand Response"), by simulating the behavior of rational consumers under a set of historical scenarios drawn from the greater San Francisco Bay Area. Using realistic dynamic consumption models, we gain novel insights into the effects of intertemporal substitution on individual and social surplus. Defining the concept of a baseline-taking equilibrium, we are able to estimate the welfare impact of the perverse incentive to inflate the Demand Response baseline, under the assumption of perfect foresight.

An assessment of the effects of demand response in electricity markets

International Transactions on Electrical Energy Systems, 2012

In this paper, we present a method for assessing the impacts of demand-response (DR) programs on the load profile and the market prices, which can be recognized directly in terms of the demand elasticity (DE). The method simulates the effects of the DE arising from the DR programs on the liberalised wholesale electricity market. The influence of DR programs on the DE in the market is estimated, and then the impact of the DE on the load profile and the market prices is simulated using the day-ahead market-simulation tool by calculating a new market equilibrium point. The model is more suitable for initial planning stages of the DR programs and could be used to assess what levels of elasticity would be necessary to achieve the desired levels of DR and savings.

Optimal time-of-use pricing for residential load control

2011

Abstract Demand response (DR) can be defined as change in electric usage by end-use customers from their normal consumption patterns in response to change in the price of electricity over time. Demand Response also refers to incentive payments designed to induce lower electricity use at times of high wholesale market prices. Time-of-use (TOU) power pricing has been shown to have a significant influence on ensuring a stable and optimal operation of a power system.

Power/energy: Demand-side load management: The rising cost of peak-demand power means that utilities must encourage customers to manage power usage

IEEE Spectrum, 2000

Demand-side load management The rising cost of peak-demand power means that utilities must encourage customers to manage power usage [lJ Load management canshavethepeaks and fill in the gapsin the daily demandpattern Ior electric powe;: The curve shown hererepresents theprojectedhour-to-hour demandfor a winter weekdayin1990 in thePublicService Electric and GasCo.'sNew Jersey service area. Thepeak demandcanbereducedand theoffpeak demandincreased (shaded areas) by suchload-management techniques as interruptible service and load-control cyclical serviceand thermal storage. A simple peak/off-peak rate structure requires a two-or threeregister meter, each measuring total consumption within a specific time. Weekends as well as nights are usually off-peak periods. Another rate pattern, encompassing multiple cost zones, incorporates peak, off-peak, and shoulder (occurring either before or after a peak) periods. The costs in shoulder periods fall between those in peak and off-peak periods. Several utilities have investigated demand rates for residential customers. These incorporate a charge for the rate at which energy is used, as wellas for total energy use. A charge is incurred for the greatest rate of use in a high-demand period, measured as the maximum kilowatthour consumption per hour within a certain time interval (generally 15or 30 minutes). Demand rates are difficult for a residential consumer to understand and accept. Movement to this concept may not occur for many years, if ever. But a number of utilities already offer time-of-day rate structures to residential customers. Generally the intent is to encourage voluntary use of any kind during an off-peak periodfor example, from 9 p.m, to 7 a.m. Customers with storage heating, solar heating, and certain heat pumps can take advantage easiiy of the iower rates. Commercial and industrial customers are usually quick to take advantage of time-of-day rates. But even when the off-peak rates are five times cheaper, studies have shown that residential consumers are often unwilling to make more than minor changes in their patterns of electricity consumption. For "basic" appliances-those not involved in space and water heating-they seldom shift use by more than 2 percent from peak to off-peak periods.

The Economics of Electricity Dynamic Pricing and Demand Response Programmes

This document is the first deliverable of the project entitled Adaptive and TOU pricing schemes for smart technology integration, funded by the Swiss Federal Office of Energy (SFOE). Its aim is twofold: (i) through an economic analysis, we explore the different possible schemes of adaptive and time-varying tariffs that could be proposed by electricity distributors, in the context of a development of smart-grid technologies; (ii) based on economic models, we evaluate the potential for these tariffs to realise load shifting and/or shedding and to facilitate the integration of battery and plug-in hybrid electric vehicles (BEVs and PHEVs).

Towards variable end-consumer electricity tariffs reflecting marginal costs: A benchmark tariff

2010

A time-varying, hourly-based electricity tariff scheme for end-consumers is proposed that reflects truthfully marginal costs of electricity provision, based on spot market prices, and electricity transmission, based on actual T&D grid load levels. This tariff scheme is proposed as a benchmark for studying demand response (DR) of end-consumer. The tariff concept is applied to the situation in the city of Zurich, Switzerland, using time-series of the Swiss EEX power market spot prices and Zurich's yearly electricity load profile. A price spread analysis and a benchmark for measuring the economic incentive of variable electricity tariffs on the end-consumer side are presented. Index Terms-Electricity tariffs, real-time pricing (RTP), end-consumer electricity prices, electricity price spread, smart metering, demand response (DR).

Electricity Retail Rate Design in a Decarbonized Economy: An Analysis of Time-of-Use and Critical Peak Pricing

SSRN Electronic Journal

Currently, most U.S. electricity consumers pay a constant price per kWh consumed that accounts for most of their bill. Ongoing developments in the power system increase efficiency gains that can be made from exposing consumers to widely varying wholesale spot prices. Pure spot pricing is not popular; consumers (and politicians) value price predictability and bill stability. We focus on second-best alternatives: time-of-use (TOU) and critical peak pricing (CPP). We introduce alternative assessment criteria tailored to a context with increasing intraday shiftable loads. Using historical data from CAISO, ERCOT and ISO-NE, we find that out-of-sample daily Spearman rank correlations between TOU rates and spot prices can be relatively high (averaging 0.7-0.8), and simulations confirm that TOU rates can reasonably replicate efficient load-shifting incentives (up to 60-70% of the potential). Our analysis suggests that TOU rates, especially when complemented with CPP, can be considerably more socially valuable than previously estimated.

Peak demand and time-of-use pricing in a field study of residential electricity demand in Germany

2014

According to the EU Energy Services Directive 2006/32/EC 2010 utilities need to offer final customers of electricity a tariff which provides incentives to save electricity. Such tariffs may vary by load or by time of use (TOU). Unlike flat rates, dynamic pricing (including time of use pricing), more adequately reflects the true marginal cost of electricity supply, sets financial incentives to shift demand from peak loads to off-peak loads, helps integrate fluctuating renewables (notably wind and solar) and plug-in electric vehicles into the electric grid, and depending on its magnitude and geographical location, the shift in demand and improved load management may also save costs for building and running generation and transmission infrastructure (e.g. Borenstein 2005, Faruqui and Palmer 2011, Joskow 2012).