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

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Author Info
Andreas V. Stokke, Gerard L. Doorman, Torgeir Ericson () (Statistics Norway)
Abstract

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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Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 574.

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Date of creation: Jan 2009
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Handle: RePEc:ssb:dispap:574

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Related research
Keywords: Electricity consumption; demand charge tariff; demand response;

Find related papers by JEL classification:
D10 - Microeconomics - - Household Behavior - - - General
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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  1. Faruqui, Ahmad & George, Stephen, 2005. "Quantifying Customer Response to Dynamic Pricing," The Electricity Journal, Elsevier, vol. 18(4), pages 53-63, May. [Downloadable!] (restricted)
  2. Herter, Karen, 2007. "Residential implementation of critical-peak pricing of electricity," Energy Policy, Elsevier, vol. 35(4), pages 2121-2130, April. [Downloadable!] (restricted)
  3. Berg, Sandford V. & Savvides, Andreas, 1983. "The theory of maximum kW demand charges for electricity," Energy Economics, Elsevier, vol. 5(4), pages 258-266, October. [Downloadable!] (restricted)
  4. Mostafa Baladi, S. & Herriges, Joseph A. & Sweeney, Thomas J., 1998. "Residential response to voluntary time-of-use electricity rates," Resource and Energy Economics, Elsevier, vol. 20(3), pages 225-244, September. [Downloadable!] (restricted)
  5. Robert Engle & Clive Granger & Ramu Ramanathan & Farshid Vahid-Araghi & Casey Brace, 1992. "Short-Run Forecasts of Electricity Loads and Peaks," University of California at San Diego, Economics Working Paper Series 92-49, Department of Economics, UC San Diego.
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  6. Granger, Clive W. J. & Engle, Robert & Ramanathan, Ramu & Andersen, Allan, 1979. "Residential load curves and time-of-day pricing : An econometric analysis," Journal of Econometrics, Elsevier, vol. 9(1-2), pages 13-32, January. [Downloadable!] (restricted)
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