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Time-based pricing and electricity demand response: Existing barriers and next steps

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  • Eid, Cherrelle
  • Koliou, Elta
  • Valles, Mercedes
  • Reneses, Javier
  • Hakvoort, Rudi

Abstract

Interest in Demand Response (DR) is increasing due to its potential to improve reliability and save costs for electricity systems. DR can provide a sustainable and cost-effective option for supply balancing, especially in a scenario with more volatile inflows from renewable energy sources. End-users can be incentivized to provide DR through time-based pricing in general and dynamic pricing in particular. This paper provides a theoretic framework and practice-oriented review of the status of DR in Europe, outlining the major challenges currently hampering further DR development. Important challenges involve the split-incentive issue for investments in enabling technologies, traditional market rules for flexibility that favor large generation units and the need for electricity market and network operation coordination.

Suggested Citation

  • Eid, Cherrelle & Koliou, Elta & Valles, Mercedes & Reneses, Javier & Hakvoort, Rudi, 2016. "Time-based pricing and electricity demand response: Existing barriers and next steps," Utilities Policy, Elsevier, vol. 40(C), pages 15-25.
    • Handle: RePEc:eee:juipol:v:40:y:2016:i:c:p:15-25
    DOI: 10.1016/j.jup.2016.04.001
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    References listed on IDEAS

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