Industrial response to spot electricity prices: some empirical evidence
Name
MIT-EL-80-016WP-06826605.pdf
Size
2.33 MB
Format
Adobe PDF
Checksum (MD5)
8fe881797aeaac08626ad5aa68fbd1a3
Author(s)
Bohn, Roger E.
Date Issued
February 1980
Publisher
MIT Energy Laboratory
Series/Report no.
MIT-EL
80-016wp
Abstract
Time of day prices for electricity are usually preferable to
constant rates, as the true cost of generating energy varies over the
course of a day. But time of day rates are still inefficient,
because prices do not change in step with day by day random fluctuations
in actual generating costs. Spot prices, which change every five minutes,
can avoid this inefficiency by tracking actual marginal cost.
This paper empirically estimates the ability of industrial
customers to respond to rapidly varying prices. The conclusion is
that some customers will be able to react quickly to such prices.
Because the estimates were made from a rate structure which is not
a full spot pricing system, the magnitude of customer response
remains problematic. Also, it appears that the utility in questions
could make a minor change to its rate structure which would help
both it and its customers.
Subjects
Electric utilities |x Rates
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