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Using behavioural economic theory in modelling of demand response

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  • Good, Nicholas

Abstract

Demand response is recognised as a potentially cost-effective means for providing the increasing amounts of flexibility needed in power systems with increasing penetrations of renewables. However, existing techno-economic approaches for flexible power systems modelling do not recognise that demand response, where it affects the comfort of the end-user, is heavily influenced by the biases and preferences of consumers. That is, demand response is modelled under the assumption that end-users are always rational and active economic agents. This has consistently resulted in seemingly inexplicable gaps between modelled and observed results for demand response schemes. Behavioural economics, which applies psychological insights into economic modelling, has been proposed to address this problem.

Suggested Citation

  • Good, Nicholas, 2019. "Using behavioural economic theory in modelling of demand response," Applied Energy, Elsevier, vol. 239(C), pages 107-116.
    • Handle: RePEc:eee:appene:v:239:y:2019:i:c:p:107-116
    DOI: 10.1016/j.apenergy.2019.01.158
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