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Price Responsiveness in Electricity Markets: Implications for Demand Response in the Midwest

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  • Derya Eryilmaz, Timothy M. Smith, and Frances R. Homans

Abstract

This paper provides an empirical analysis of price responsiveness in retail and wholesale markets in the Midcontinent ISO electricity markets. In the retail market, consumers do not often observe real-time price changes and pay a pre-determined flat rate, but are able to respond to price over longer time periods. In the wholesale electricity market, buyers are able to adjust their electricity purchases based on real-time price changes. Our findings show that retail industrial customers respond differently in different across states in the Midwest. We also find differences in real-time wholesale price elasticities between sub-regional pricing hubs in the MISO footprint. Results suggest that the observed differences in price responsiveness of demand across market levels and sub-regions are associated with demand response program adoption.

Suggested Citation

  • Derya Eryilmaz, Timothy M. Smith, and Frances R. Homans, 2017. "Price Responsiveness in Electricity Markets: Implications for Demand Response in the Midwest," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    • Handle: RePEc:aen:journl:ej38-1-eryilmaz
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    2. Cédric Clastres & Haikel Khalfallah, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Post-Print hal-03193212, HAL.
    3. Cédric Clastres & Haikel Khalfallah, 2020. "Retailers' strategies facing demand response and markets interactions," Working Papers hal-03167543, HAL.
    4. Clastres, Cédric & Khalfallah, Haikel, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Energy Economics, Elsevier, vol. 98(C).
    5. James I. Stewart, 2020. "Utility Customer Supply of Demand Response Capacity," The Energy Journal, , vol. 41(4), pages 129-152, July.
    6. Silvana Tiedemann & Raffaele Sgarlato & Lion Hirth, 2023. "Price elasticity of electricity demand: Using instrumental variable regressions to address endogeneity and autocorrelation of high-frequency time series," Papers 2306.12863, arXiv.org.

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