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Pricing residential load shedding as a call option

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  • Geiss, Charles G

Abstract

Air-conditioner power-interruption programs are shown by simulation to reduce the peaks of a utility load profile. The value of this load-shifting capability is determined by a financial call option pricing model. The air-conditioner interruption option is determined to be worth about $0.65 per summer month to a representative utility; but this value varies widely with costs, volatility of demand, and the skill of implementation by utility managers. The interruption option is given an imputed value derived from the share prices of the utility. This imputed value approximates the value obtained by simulation.

Suggested Citation

  • Geiss, Charles G, 1998. "Pricing residential load shedding as a call option," Energy, Elsevier, vol. 23(4), pages 309-316.
    • Handle: RePEc:eee:energy:v:23:y:1998:i:4:p:309-316
    DOI: 10.1016/S0360-5442(97)00091-1
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