Identification of consumers' price responses in the dynamic pricing of electricity

Abstract

This paper considers the modeling of residential consumers' price responses in the dynamic pricing of electricity. The consumers' behaviour is described by a utility function indicating the benefit of different daily electricity consumption patterns. We approximate this function by a quadratic form in the neighborhood of the consumers' nominal consumption patterns. The effects of outdoor temperature are taken into account, since outdoor temperature, in addition to the rate, affects the shape of the consumption pattern. Data used in the model identification is obtained from a Finnish dynamic pricing experiment. The results suggest that the consumers consider the whole daily price pattern when they plan their daily electricity use. The model based on the local approximation of the consumers' utility function predicts the consumption pattern well when the daily price pattern resembles the patterns used in the model identification process.