Lunch n Learn with Operations Prof. Ozge Islegen – A Discussion on Time-Based Pricing in Electricity Supply Chains and Demand Response Programs in the Wholesale Electricity Market
by Energy Club
An Analysis of Time-Based Pricing in Electricity Supply Chains
This paper empirically evaluates the impact of time-based tariffs on the electricity supply chain. We investigate the residential electricity demand and supply equilibrium, using data from a field experiment conducted by the Ireland Commission for Energy Regulation: We first estimate individual households’ demand as a function of retail electricity prices. Then, we characterize the optimal retail prices under the flat rate, time-of-use (TOU) and real-time pricing (RTP) schemes for the social planner, the monopolist retailer and in a perfectly competitive retail electricity market. We find that time-based pricing schemes can be effective in reducing the peak load. Specifically, a simple TOU tariff with predetermined rates for different hours of the day can reduce the peak load as much as RTP. However, time-based tariffs do not reduce consumers’ electricity bills or total consumption significantly. Finally, time-based prices only slightly increase the carbon dioxide emissions in Ireland. Nonetheless, the environmental impact of these tariffs can be significant in other electricity markets with different generation mix and dispatch decisions.
An Analysis of Demand Response Programs in the Wholesale Electricity Market
This paper explores the effects of demand response (DR) providers’ participation in the wholesale electricity markets. Similar to power plant owners who bid megawatts of generation into the spot-market electricity auctions, a demand response provider can bid ‘negawatts’, or reductions in energy use.
2211 Campus Drive , Evanston, IL 60208
Assistant Professor of Operations
Kellogg School of Management
Ozge Islegen is an Assistant Professor of Operations. After receiving her PhD in Operations, Information and Technology at Stanford University, she joined Kellogg in 2011. Professor Islegen's research interests include supply chain management, capacity management, environmental sustainability and energy-related operations; specifically, energy supply chains, and capacity investment strategies under environmental regulations.