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Presented at:
XIX Annual International Conference of the Society of
Operations Management.
December 12, 2015.
Indian Institute of Management Calcutta (IIMC), Kolkata, India.
Introduction
FLATENED LOAD CURVE
CAPACITY
PRICE
LOAD
TIME
• Electricity consumers generally face flat rate tariffs
• Thus they have no incentive to shift their consumption from one time
of the day to another
• This creates peaks and troughs in a load curve
• New power generation capacities need to be installed just to meet peak
demand and such facilities remain idle during off-peak hours
• Dynamic prices can modify consumption behaviour and flatten load
curves and thus retard investment for new capacity addition
Contents of this Presentation
• Electricity Market
• Dynamic Pricing
• Generating companies
(Power producers)
Regulator Electricity • Consumers ( Industrial,
Exchange Consumers Commercial and
Household)
• Transmission
companies
• Distribution
Electricity companies
Sellers
• Power Exchanges
• Regulators
Bilateral Contracts Transaction from
Through Exchange seller
Dynamic Pricing
• The practice of pricing items at a level determined by a
particular customer's (or particular group of
customers’) perceived ability to pay
• It is a common practice in several industries such as
hospitality, travel, entertainment and retail
• Dynamic pricing is legal, and the general public has
learned to accept dynamic pricing when purchasing
airline tickets or reserving hotel rooms
• Dynamic pricing helps in absorbing consumer surplus
and thus maximizing revenue
Experiments Related to Dynamic
Pricing of Electricity
Some experimental findings:
• Demand response depend on ratio of the peak and off-
peak prices and such curves are non-linear (Faruqui &
Sergici, 2014)
• Price responsiveness is higher in hotter climates and
with enabling technology. Residential response is more
than commercial and small industrial (Faruqui et al.,
2014)
• Demand is mostly income and price inelastic but varies
with lifestyle, demographic and geographical factors
(Filippini & Pachauri, 2004) (Bose & Shukla, 1999)
(Tiwari, 2000) (Zhou & Teng, 2013)
Various Pricing Schemes