Aggregate industrial energy consumer response to wholesale prices in the restructured Texas electricity market

Jay Zarnikau and Ian Hallett

Energy Economics, 2008, vol. 30, issue 4, pages 1798-1808

Abstract: The aggregate response of consumers to wholesale price signals is very limited in the restructured Electric Reliability Council of Texas (ERCOT) market. An overall average own-price elasticity of demand of -Â 0.000008 for industrial energy consumers served at transmission voltage is estimated using a Symmetric Generalized McFadden cost function model. To date, ERCOT has sought to promote demand response to price signals without reliance on "stand alone" demand response programs, but with a market structure that is designed to facilitate economic demand response. This very limited responsiveness to wholesale price signals may prove problematic in light of policy decisions to pursue an "energy only" resource adequacy mechanism for ERCOT.

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