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An Analytical Approach to Activating Demand Elasticity with a Demand Response Mechanism

Author

Listed:
  • Cédric Clastres

    (équipe EDDEN - PACTE - Pacte, Laboratoire de sciences sociales - UPMF - Université Pierre Mendès France - Grenoble 2 - UJF - Université Joseph Fourier - Grenoble 1 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique)

  • Haikel Khalfallah

    (équipe EDDEN - PACTE - Pacte, Laboratoire de sciences sociales - UPMF - Université Pierre Mendès France - Grenoble 2 - UJF - Université Joseph Fourier - Grenoble 1 - IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this work is to demonstrate analytically the conditions under which activating the elasticity of consumer demand could benefit social welfare. We have developed an analytical equilibrium model to quantify the effect of deploying demand response on social welfare and energy trade. The novelty of this research is that it demonstrates the existence of an optimal area for the price signal in which demand response enhances social welfare. This optimal area is negatively correlated to the degree of competitiveness of generation technologies and the market size of the system. In particular, it should be noted that the value of un-served energy or energy reduction which the producers could lose from such a demand response scheme would limit its effectiveness. This constraint is even greater if energy trade between countries is limited. Finally, we have demonstrated scope for more aggressive demand response, when only considering the impact in terms of consumer surplus.

Suggested Citation

  • Cédric Clastres & Haikel Khalfallah, 2015. "An Analytical Approach to Activating Demand Elasticity with a Demand Response Mechanism," Post-Print hal-01222582, HAL.
    • Handle: RePEc:hal:journl:hal-01222582
    DOI: 10.1016/j.eneco.2015.10.013
    Note: View the original document on HAL open archive server: https://hal.univ-grenoble-alpes.fr/hal-01222582
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    References listed on IDEAS

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    Cited by:

    1. Clastres, Cédric & Khalfallah, Haikel, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Energy Economics, Elsevier, vol. 98(C).
    2. Michael L. Polemis, 2018. "A mixed integer linear programming model to regulate the electricity sector," Letters in Spatial and Resource Sciences, Springer, vol. 11(2), pages 183-208, July.
    3. Daeho Kim & Dong Gu Choi, 2023. "The aggregator’s contract design problem in the electricity demand response market," Operational Research, Springer, vol. 23(1), pages 1-47, March.
    4. Lynch, Muireann & Devine, Mel T. & Bertsch, Valentin, 2019. "The role of power-to-gas in the future energy system: Market and portfolio effects," Energy, Elsevier, vol. 185(C), pages 1197-1209.
    5. Lynch, Muireann Á & Devine, Mel & Bertsch, Valentin, 2018. "The role of power-to-gas in the future energy system: how much is needed and who wants to invest?," Papers WP590, Economic and Social Research Institute (ESRI).
    6. Hayn, Marian & Bertsch, Valentin & Zander, Anne & Nickel, Stefan & Fichtner, Wolf, 2016. "The impact of electricity tariffs on residential demand side flexibility," Working Paper Series in Production and Energy 14, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    7. Cédric Clastres & Haikel Khalfallah, 2020. "Retailers' strategies facing demand response and markets interactions," Working Papers hal-03167543, HAL.

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    Keywords

    Welfare Analysis; Price Signals; Demand Response;
    All these keywords.

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