A review of the costs and benefits of demand response for electricity in the UK

The recent policy discussion in the UK on the economic case for demand response (DR) calls for a reflection on available evidence regarding its costs and benefits. Existing studies tend to consider the size of investments and returns of certain forms of DR in isolation and do not consider economic welfare effects. From review of existing studies, policy documents, and some simple modelling of benefits of DR in providing reserve for unforeseen events, we demonstrate that the economic case for DR in UK electricity markets is positive. Consideration of economic welfare gains is provided.

Demand, supply and willingness-to-pay for extension services in an emerging-market setting

Although it may be wholly inappropriate to generalize, the most important resource available to a subsistence household is the total amount of time that its members have available to spend in productive enterprises. In this context, services that minimize the time that it takes to perform productive activities are valuable to the household. Consequently the household is willing to relinquish quantities of other resources in exchange for quantities of the time-saving service. These simple observations motivate a search for the values that subsistence households place on time-saving services. This search is especially important when it is realized that extension services promote productivity, enhance the surplus-generating potential of the household and can, as a consequence, promote immersion into markets that are currently constrained by thinness and instability. In this capacity, extension visitation has the potential to overcome one of the principal impediments to economic development, namely lack of density of market participation. In this article, we consider this issue in the context of a rich data set on milk-market participation by small-holder dairy producers in the Ethiopian highlands.

Demand response from the non-domestic sector: early UK experiences and future opportunities

Demand response is believed by some to become a major contributor towards system balancing in future electricity networks. Shifting or reducing demand at critical moments can reduce the need for generation capacity, help with the integration of renewables, support more efficient system operation and thereby potentially lead to cost and carbon reductions for the entire energy system. In this paper we review the nature of the response resource of consumers from different non-domestic sectors in the UK, based on extensive half hourly demand profiles and observed demand responses. We further explore the potential to increase the demand response capacity through changes in the regulatory and market environment. The analysis suggests that present demand response measures tend to stimulate stand-by generation capacity in preference to load shifting and we propose that extended response times may favour load based demand response, especially in sectors with significant thermal loads.

Controlling market power of vertically integrated firms in electricity networks: demand response of aggregator agents

This article reports the results of an experiment that examined how demand aggregators can discipline vertically-integrated firms - generator and distributor-retailer holdings-, which have a high share in wholesale electricity market with uniform price double auction (UPDA). We initially develop a treatment where holding members redistribute the profit based on the imposition of supra-competitive prices, in equal proportions (50%-50%). Subsequently, we introduce a vertical disintegration (unbundling) treatment with holding-s information sharing, where profits are distributed according to market outcomes. Finally, a third treatment is performed to introduce two active demand aggregators, with flexible interruptible loads in real time. We found that the introduction of responsive demand aggregators neutralizes the power market and increases market efficiency, even beyond what is achieved through vertical disintegration.

Identified consumers: an experiment on the informativeness of cross-demand price effects

Often, firms have no information on the specification of the true demand model they are faced with. It is, however, a well established fact that trial-and-error algorithms may be used by them in order to learn how to make optimal decisions. Using experimental methods, we identify a property of the information on past actions which helps the seller of two asymmetric demand substitutes to reach the optimal prices more precisely and faster. The property concerns the possibility of disaggregating changes in each product’s demand into client exit/entry and shift from one product to the other.

Agricultural policies exacerbate honeybee pollination service supply-demand mismatches across Europe

Declines in insect pollinators across Europe have raised concerns about the supply of pollination services to agriculture. Simultaneously, EU agricultural and biofuel policies have encouraged substantial growth in the cultivated area of insect pollinated crops across the continent. Using data from 41 European countries, this study demonstrates that the recommended number of honeybees required to provide crop pollination across Europe has risen 4.9 times as fast as honeybee stocks between 2005 and 2010. Consequently, honeybee stocks were insufficient to supply >90% of demands in 22 countries studied. These findings raise concerns about the capacity of many countries to cope with major losses of wild pollinators and highlight numerous critical gaps in current understanding of pollination service supplies and demands, pointing to a pressing need for further research into this issue.

Demand side response: patterns in Europe and future policy perspectives under capacity mechanisms

Demand Side Response (DSR) has been slow to emerge in European electricity markets. This paper aims to both examine the reasons for low levels of DSR in Europe and reflect on factors that might affect the participation of DSR in capacity mechanisms. It relies on available evidence from the literature, secondary data on existing DSR programmes and energy aggregator's data from industries participating in DSR. Findings show that changes to the duration of contracted loads under existing or new programmes might increase the penetration of DSR. The introduction of capacity mechanisms may increase DSR from demand turn down if longer response times were available.

Tests of non-linearity using LIFFE futures transactions price data

This paper presents and implements a number of tests for non-linear dependence and a test for chaos using transactions prices on three LIFFE futures contracts: the Short Sterling interest rate contract, the Long Gilt government bond contract, and the FTSE 100 stock index futures contract. While previous studies of high frequency futures market data use only those transactions which involve a price change, we use all of the transaction prices on these contracts whether they involve a price change or not. Our results indicate irrefutable evidence of non-linearity in two of the three contracts, although we find no evidence of a chaotic process in any of the series. We are also able to provide some indications of the effect of the duration of the trading day on the degree of non-linearity of the underlying contract. The trading day for the Long Gilt contract was extended in August 1994, and prior to this date there is no evidence of any structure in the return series. However, after the extension of the trading day we do find evidence of a non-linear return structure.

The timing and societal synchronisation of energy demand

It is increasingly important to know about when energy is used in the home, at work and on the move. Issues of time and timing have not featured strongly in energy policy analysis and in modelling, much of which has focused on estimating and reducing total average annual demand per capita. If smarter ways of balancing supply and demand are to take hold, and if we are to make better use of decarbonised forms of supply, it is essential to understand and intervene in patterns of societal synchronisation. This calls for detailed knowledge of when, and on what occasions many people engage in the same activities at the same time, of how such patterns are changing, and of how might they be shaped. In addition, the impact of smart meters and controls partly depends on whether there is, in fact scope for shifting the timing of what people do, and for changing the rhythm of the day. Is the scheduling of daily life an arena that policy can influence, and if so how? The DEMAND Centre has been linking time use, energy consumption and travel diary data as a means of addressing these questions and in this working paper we present some of the issues and results arising from that exercise.

A review of time use models of residential electricity demand

Residential electricity demand in most European countries accounts for a major proportion of overall electricity consumption. The timing of residential electricity demand has significant impacts on carbon emissions and system costs. This paper reviews the data and methods used in time use studies in the context of residential electricity demand modelling. It highlights key issues which are likely to become more topical for research on the timing of electricity demand following the roll-out of smart metres.

A peak reduction scheduling algorithm for storage devices on the low voltage network

Reinforcing the Low Voltage (LV) distribution network will become essential to ensure it remains within its operating constraints as demand on the network increases. The deployment of energy storage in the distribution network provides an alternative to conventional reinforcement. This paper presents a control methodology for energy storage to reduce peak demand in a distribution network based on day-ahead demand forecasts and historical demand data. The control methodology pre-processes the forecast data prior to a planning phase to build in resilience to the inevitable errors between the forecasted and actual demand. The algorithm uses no real time adjustment so has an economical advantage over traditional storage control algorithms. Results show that peak demand on a single phase of a feeder can be reduced even when there are differences between the forecasted and the actual demand. In particular, results are presented that demonstrate when the algorithm is applied to a large number of single phase demand aggregations that it is possible to identify which of these aggregations are the most suitable candidates for the control methodology.

Any response? How demand response could be enhanced based on early UK experience

Policy makers are in broad agreement that demand response should play a major role in EU electricity systems and provide much needed future system flexibility. Yet, little demand response has been forthcoming in member states to date. This paper identifies some of the technical potential for demand response, based on empirical data from one UK demand aggregator. Half-hourly electricity readings of demand during normal operation and during response events have been analysed for different industry and service sectors. We review these findings in the context of ongoing EU policy developments with particular focus on the role appropriate arrangements to enhance the available resource. We conclude that in some sectors appropriate policy and regulation could triple the available response capacity and thereby lead to stronger commercial uptake of demand response.