Demand response to price

Variable spot prices, time-of-use tariffs and variable grid tariffs provide incentives for small-scale demand to adjust the time or quantity of electricity they consume to the needs of the power system. When end user prices vary depending on the balance between demand and generation, demand response can address adequacy. If prices vary depending on the time of day or limitations in the grid, demand response could help congestion management.

While the spot prices are decided on an hourly basis in the day-ahead market, the end user price is also influenced by grid tariffs. Some projects look at the response to variable/dynamic spot prices, others at time-of-use tariffs. Most projects consider small-scale residential demand, some also consider service buildings and electric vehicle charging.


Components & enablers

Successful at adjusting their electricity usage to take:

  • Providing customers with information about their consumption and prices
  • Smart home appliances

State of the art in application and research

A range of projects investigating dynamic prices and time-of-use (ToU) tariffs have been conducted in Europe and the US. Variable spot price contracts are available in many European countries; however, variable grid tariffs are currently not very common.

In ECOGRID EU approx. 2000 residential customers participated in the project, which addressed flexible demand response to real-time price signals. The pilot took place in the Danish island of Bornholm, with more than 50% renewable energy sources.

Customer-Led Network Revolution conducted trials in the UK on time of use tariffs. They found that demand was reduced by 10% in the 4-8 pm evening peak, reducing customer energy bills. Specifically, they found that “Household chores such as laundry and dishwashing were the most commonly used to flex the times of electricity usage. Customers with PV had advantage of their own generation and were arguably the most engaged customers of all”. Families and customers of older age were less flexible than other customers.


Technology Readiness Level

TRL9

A range of projects have been conducted, and spot prices are commercially available today.

For general price response, there is some research to fully understand expected response or how to maximize it in Europe. Many projects have been performed on dynamic pricing in the US. Research is ongoing in some countries on how to design variable grid tariffs, but this has not yet been implemented large-scale.

TRL 9 refers to the demand response to wholesale energy price. The TRL level regarding capacity or grid capacity pricing is not there yet, as illustrated below with the R&D focus.


Current focus of R&D and research gaps

Statnett, the Norwegian TSO, will conduct a demand response pilot with dynamic grid tariffs, called iFlex. Contact: matthias.hofmann@statnett.no.

Research is ongoing in several countries on how to design variable grid tariffs.


References

[1] RealValue. [Link]

[2] SmartTariff. [Link]

[3] ECOGRID-EU. [Link]

[4] Linear Customer-Led Network Revolution. [Link]