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Electricity deregulation, spot price patterns and demand-side management

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  • Li, Y.
  • Flynn, P.C.

Abstract

This paper examines extensive hourly or half-hourly power price data from 14 deregulated power markets. It analyzes average diurnal patterns, relationship to system load, volatility, and consistency over time. Diurnal patterns indicate the average price spread between off-peak and on-peak and weekend vs. weekday power consumption. Volatility is measured by price velocity: the average normalized hourly change in power price, calculated daily. The calculated price velocity is broken down into an expected component that arises from the diurnal pattern and an unexpected component that arises from unknown factors. The analysis reveals significant differences among markets, suggesting that demand-side management (DSM) of power consumption is far more difficult in some markets than in others. At one extreme, Spain, Britain and Scandinavia show consistent diurnal price patterns, a stable relationship between price and system load, and a low unexplained component of price volatility. A power consumer in these markets could form a reasonable expectation of a reward for DSM of elective power consumption. At the other extreme, two markets in Australia show erratic diurnal price patterns from year to year, low correlation between price and system load, and a high amount of unexpected price velocity. A power consumer in these markets would have far greater difficulty in realizing a benefit from DSM. Markets that experienced one period of very high prices without a clear external cause, such as California and Alberta, appear to have a significant longer-term erosion of public support for deregulation.

Suggested Citation

  • Li, Y. & Flynn, P.C., 2006. "Electricity deregulation, spot price patterns and demand-side management," Energy, Elsevier, vol. 31(6), pages 908-922.
    • Handle: RePEc:eee:energy:v:31:y:2006:i:6:p:908-922
    DOI: 10.1016/j.energy.2005.02.018
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    1. Li, Ying & Flynn, Peter C., 2004. "Corrigendum to "Deregulated power prices: comparison of diurnal patterns" [Energy Policy 32 (2004) 657-672]," Energy Policy, Elsevier, vol. 32(9), pages 1147-1148, June.
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