Agent-based model for electricity consumption and storage to evaluate economic viability of tariff arbitrage for residential sector demand response

The Australian electricity industry – like many other countries globally – is currently facing the complex challenge of reforming electricity tariffs. Momentum is growing for transitioning residential consumers toward more ‘cost-reflective’ pricing that better reflects the true costs of generation and supply, and sends a ‘price signal’ that presumably incentivises reduced consumption during peak periods. Under such tariffs, customers pay more for electricity used during times of peak demand – unlike traditional ‘flat-rate’ tariffs where the price remains stable regardless of time or demand. Pilot trials indicate that cost-reflective tariffs might succeed in reducing peak demand, but often only for a small minority of customers, such that population-wide demand response is minimal or insignificant. In this paper, we apply insights from psychology and behavioural economics to identify how cost-reflective pricing can be designed, depicted and delivered to enhance customer uptake and optimal usage –thereby facilitating ‘appropriate’ demand response – for a larger cross-section of the population. By carefully considering the likely impact of relevant cognitive biases and psychological factors –which routinely shape human decision making and behaviour – we are able to propose practical strategies that industry can adopt to maximise the prospect of cost-reflective pricing achieving significant population-level peak demand reductions, while providing shared benefits for customers, retailers, networks and regulators alike.

/pdf/uptake-and-usage-of-cost-reflective-electricity-pricing-4g2hb5iyk0.pdf

Uptake and usage of cost-reflective electricity pricing: Insights from psychology and behavioural economics

https://ourarchive.otago.ac.nz/bitstream/handle/10523/2084/DP_1116.pdf?sequence=1

Consumer responses to time varying prices for electricity

https://www.econstor.eu/bitstream/10419/192428/1/dp446.pdf

Households' self-selection of a dynamic electricity tariff

Residential response to voluntary time-of-use electricity rates

Time-of-use (TOU) pricing has emerged in recent years as a popular rate program, offering utilities both a more efficient pricing mechanism and a tool for load management. Initial experiments with TOU pricing were generally designed to provide evidence on customer response to mandatory TOU rates, while residential TOU rates are currently being applied on a voluntary basis. In this paper evidence is provided on customer response in Pacific Gas and Electric's voluntary TOU rate experiment. Comparing the results to those obtained in earlier mandatory experiments, volunteers are found to have a greater ability to shift usage in response to TOU rates than comparable customers on mandatory rates.

K. A. Kuester

Papers

Load Shifting Under Voluntary Residential Time-Of-Use Rates