Tool for determining price elasticity of electricity demand and designing dynamic price program

Abstract

A tool has been developed to determine the price elasticity of electricity demand using data from dynamic pricing pilots with time of use and/or critical peak pricing rates. Elasticity values are derived from an augmented Constant Elasticity of Substitution model. Using the calculated elasticity values, the tool can further project changes in electricity loads as a function of electricity prices and temperatures as specified by utilities; conversely, the tool is capable of calculating the pricing structure necessary to achieve utility-defined objectives for peak load reduction and revenue, under a given set of temperatures. Data from the California Statewide Pricing Pilot study was used for tool development and testing. Tool testing was conducted by comparing the loads and shift in loads, calculated from the tool versus observed from the pilot study, resulting in close agreements. Furthermore, use of this tool under three likely scenarios of interest to utilities is presented.