Costs of Demand Response from Residential Customers’ Perspective

Madia Safdar, Ghulam Amjad Hussain and Matti Lehtonen
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Madia Safdar: Department of Electrical Engineering and Automation, Aalto University, 02150 Espoo, Finland
Ghulam Amjad Hussain: Department of Electrical & Computer Engineering, American University of Kuwait, Salmiya 13034, Kuwait
Matti Lehtonen: Department of Electrical Engineering and Automation, Aalto University, 02150 Espoo, Finland

Energies, 2019, vol. 12, issue 9, 1-16

Abstract: Electricity demand in a certain locality varies during the day, depending on weather conditions, daily life routines, or a social event in a town. During high/peak demands, expensive power plants are put into operation, which affects electricity prices. Moreover, power lines are overloaded. If generation capacity is insufficient, a blackout may result. Demand response (DR) programs are widely proposed in energy research to tackle these problems. Although the benefits of DR programs are well known, customer response levels to these programs is low. This is due to the small fraction of benefits they receive against the loss of comfort, lost leisure time, and other inconveniences. The objective of this work is to study DR costs from the customer perspective by considering these factors. A customer survey-based direct approach is used to evaluate the willingness of customers to accept (WTA) a certain compensation when shifting the load is adopted. Two different methods are used to calculate DR costs: percentage compensation, which customers are WTA, and one based on a macroeconomic model, which considers the dependency factor of customers on loads and hourly wage. A linear mathematical model is presented based on both these techniques. This study reveals that DR costs are much less than interruption costs paid by the utility company, and hence is in the best interests of all stakeholders, i.e., customers, utility company, and transmission company.

Keywords: Demand Response (DR); Customer Interruption Costs (CIC); DR Costs; Willingness to Pay (WTP); Willingness to Accept (WTA) (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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