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Consumer Savings, Price, and Emissions Impacts of increasing Demand Response in the Midcontinent Electricity Market

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  • Steve Dahlke and Matt Prorok

Abstract

This paper estimates consumer savings, CO2 emissions reductions, and price effects from increasing demand response (DR) dispatch in the Midcontinent Independent System Operator (MISO) electricity market. To quantify market effects, we develop a dynamic supply and demand model to explore a range of DR deployment scenarios. The study is motivated by the existence of regulatory and market rule barriers to market-based deployment of DR resources in the MISO region. We show annual consumer savings from increased market-based DR can vary from $1.3 million to $17.6 million under typical peak operating conditions, depending on the amount of DR resources available for market dispatch and the frequency of deployment. Consumer savings and other market effects increase exponentially during atypical periods with tight supply and high prices. Additionally, we find that DR deployment often reduces CO2 emissions, but the magnitude of emissions reductions varies depending on the emissions content of marginal generation at the time and location of deployment. The results of this study suggest regulators and other stakeholders should focus policy efforts to reducing regulatory barriers to DR deployment in wholesale markets, particularly in locations that experience high price spikes, to improve market efficiency and achieve cost savings for consumers.

Suggested Citation

  • Steve Dahlke and Matt Prorok, 2019. "Consumer Savings, Price, and Emissions Impacts of increasing Demand Response in the Midcontinent Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    • Handle: RePEc:aen:journl:ej40-3-dahlke
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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. Zarnikau, J. & Tsai, C.H. & Woo, C.K., 2020. "Determinants of the wholesale prices of energy and ancillary services in the U.S. Midcontinent electricity market," Energy, Elsevier, vol. 195(C).
    3. Dahlke, Steven, 2019. "Short run effects of carbon policy on U.S. electricity markets," SocArXiv b79yu, Center for Open Science.
    4. Dahlke, Steven & Sterling, John & Meehan, Colin, 2019. "Policy and market drivers for advancing clean energy," OSF Preprints hsbry, Center for Open Science.
    5. Steve Dahlke, 2019. "Short Run Effects of Carbon Policy on U.S. Electricity Markets," Energies, MDPI, vol. 12(11), pages 1-21, June.
    6. Cédric Clastres & Haikel Khalfallah, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Post-Print hal-03193212, HAL.
    7. Cédric Clastres & Haikel Khalfallah, 2020. "Retailers' strategies facing demand response and markets interactions," Working Papers hal-03167543, HAL.
    8. Bert Willems & Juulia Zhou, 2020. "The Clean Energy Package and Demand Response: Setting Correct Incentives," Energies, MDPI, vol. 13(21), pages 1-19, October.

    More about this item

    JEL classification:

    • F0 - International Economics - - General

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