Abstract
This paper provides hourly own and cross price elasticities for industrial customers with up to 8 years of experience on Duke Power optional real-time rates. We include the effects of customer characteristics and temperature conditions. Aggregated results show larger own elasticities than have previous studies, complementarity within the potential peak hours and substitution in the late evening. As customers gain experience with hourly pricing, they show larger load reductions during higher priced hours. As compared to a TOU rate, net benefits are $14,000 per customer per month, approximately 4% of the average customer’s bill, and much greater than metering costs.
Similar content being viewed by others
References
Timothy Brennan (2004) ArticleTitle‘‘Market Failures in Real-Time Metering’’. Journal of Regulatory Economics 26 IssueID2 119–139
W. Diewert T. Wales (1987) ArticleTitle‘‘Flexible Functional Forms and Global Curvature Conditions’’. Econometrica 55 IssueID1 43–68
Feger, Fritz. 2000. A Behavioral Model of the German Compound Feed Industry: Functional Form, Flexibility, and Regularity, Dissertation, Gottingen University, http://webdoc.sub.gwdg.de/diss/2000/feger/index.htm.
Goldman C., et al. 2004. Customer Response to Day-Ahead Wholesale Market Electricity Prices: Case Study of RTP Program Experience in New York. Berkeley National Laboratory, LBNL-54761, Environmental Energies Division, June.
John Ham Dean Mountain M. W. Luke Chan (1997) ArticleTitle‘‘Time-of-Use Prices and Electricity Demand: Allowing for Selection Bias in Experimental Data’‘ Rand Journal of Economics 28 IssueID0 (Special Issue) S113–S141
Herriges J., Baladi S. M., Caves D., Neenan B. ‘‘The Response of Industrial Customers to Electric Rates Based Upon Dynamic Marginal Costs.’’ 1993; 75(3): 446--454
Kim, Jinwoo. 1998. Customer Response to Real-Time Pricing of Electricity. Unpublished Ph.D. dissertation. Department of Economics, University of Colorado.
King, Kathleen, and Peter Shatrawka. 1994. ‘‘Customer Response to RealTime Pricing in Great Britain’’, ACEEE 1994 Summer Study on Energy Efficiency in Buildings, Panel 2 Demand and Load Shapes, pp. 2194--2203.
Michael O’Sheasy (2003) ArticleTitle‘‘Demand Response: Not Just Rhetoric, It Can Truly Be the Silver Bullet’’. Electricity Journal. 16 IssueID10 48–60
Patrick, Robert, and Frank Wolak. 1997. Customer Load Response to Spot Prices in England: Implications for Retail Service Design. EPRI TR-109143 Final Report, November
Patrick, Robert, and Frank Wolak. 2000. ‘‘Using Customer-Level Demand Response to Spot Prices to Design Options and Demand-Side Bids.’’ In Pricing in Competitive Electricity Markets, edited by Ahmad Faruqui and Terry Eakin. Kluwer Academic Publishers, pp. 267--293.
Patrick, Robert, and Frank Wolak. 2001. Estimating the Customer-Level Demand for Electricity Under Real-Time Market Prices, NBER Working Paper No. w8213, April.
Israel Pressman (1970) ArticleTitle‘‘A Mathematical Formulation of the Peak-Load Pricing Problem’’. Bell Journal of Economics and Management 1 IssueID2 304–326
Peter Schwarz Thomas Taylor Birmingham Matt Shana Dardan (2002) ArticleTitle‘‘Industrial Response to Electricity Real-Time Prices: Short-Run and Long-Run’’. Economic Inquiry 40 IssueID4 597–610
Thomas Taylor Peter Schwarz (1990) ArticleTitle‘‘The Long-Run Effects of a Time-of-Day Demand Charge’’. Rand Journal of Economics 21 IssueID3, Autumn 431–445
Thomas Taylor Peter Schwarz (2000) ArticleTitle‘‘Advance Notice of Real-Time Electricity Prices’’. Atlantic Economic Journal 28 IssueID4 478–488
C.-K. Woo Peter Chow Ira Horowitz (1996) ArticleTitle‘‘Optional Real-Time Pricing of Electricity for Industrial Firms’’. Pacific Economic Review 1 IssueID1 79–92
Jay Zarnikau (1990) ArticleTitle‘‘Customer Responsiveness to Real-Time Pricing of Electricity’’. Energy Journal 11 IssueID4 99–116
Author information
Authors and Affiliations
Corresponding author
Additional information
JEL classification: L51, L94, D00
We wish to acknowledge helpful comments from Herb Thompson and Steve Braithwait. We also wish to thank Colin Loxley and other participants at the Rutgers Advanced Workshop in Regulation and Competition, Lake Tahoe, CA, June 2002, as well as participants at the Second World Congress of Environmental Economics in Monterey, CA, June 2002, for comments on a preliminary version of this paper. Finally, we thank two anonymous referees for helping to improve this paper.
Rights and permissions
About this article
Cite this article
Taylor, T.N., Schwarz, P.M. & Cochell, J.E. 24/7 Hourly Response to Electricity Real-Time Pricing with up to Eight Summers of Experience. J Regul Econ 27, 235–262 (2005). https://doi.org/10.1007/s11149-005-6623-6
Issue Date:
DOI: https://doi.org/10.1007/s11149-005-6623-6