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Fostering Residential Demand Response through Dynamic Pricing Schemes: A Behavioural Review of Smart Grid Pilots in Europe

Author

Listed:
  • Kris Kessels

    (VITO (Vlaamse Instelling voor Technologisch Onderzoek)/Energyville, Boeretang 200, 2400 Mol, Belgium)

  • Carolien Kraan

    (ECN (Energieonderzoek Centrum Nederland), Westerduinweg 3, 1755 ZG Petten, The Netherlands)

  • Ludwig Karg

    (BAUM Consult GmbH, Gotzinger Straße 48/50, 81371 München, Germany)

  • Simone Maggiore

    (RSE SpA, Via Rubattino 54, 20134 Milan, Italy)

  • Pieter Valkering

    (VITO (Vlaamse Instelling voor Technologisch Onderzoek)/Energyville, Boeretang 200, 2400 Mol, Belgium)

  • Erik Laes

    (VITO (Vlaamse Instelling voor Technologisch Onderzoek)/Energyville, Boeretang 200, 2400 Mol, Belgium)

Abstract

Many smart grid projects make use of dynamic pricing schemes aimed to motivate consumers to shift and/or decrease energy use. Based upon existing literature and analyses of current smart grid projects, this survey paper presents key lessons on how to encourage households to adjust energy end use by means of dynamic tariffs. The paper identifies four key hypotheses related to fostering demand response through dynamic tariff schemes and examines whether these hypotheses can be accepted or rejected based on a review of published findings from a range of European pilot projects. We conclude that dynamic pricing schemes have the power to adjust energy consumption behavior within households. In order to work effectively, the dynamic tariff should be simple to understand for the end users, with timely notifications of price changes, a considerable effect on their energy bill and, if the tariff is more complex, the burden for the consumer could be eased by introducing automated control. Although sometimes the mere introduction of a dynamic tariff has proven to be effective, often the success of the pricing scheme depends also on other factors influencing the behavior of end users. An important condition to make dynamic tariffs work is that the end users should be engaged with them.

Suggested Citation

  • Kris Kessels & Carolien Kraan & Ludwig Karg & Simone Maggiore & Pieter Valkering & Erik Laes, 2016. "Fostering Residential Demand Response through Dynamic Pricing Schemes: A Behavioural Review of Smart Grid Pilots in Europe," Sustainability, MDPI, vol. 8(9), pages 1-21, September.
    • Handle: RePEc:gam:jsusta:v:8:y:2016:i:9:p:929-:d:77976
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    References listed on IDEAS

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    Cited by:

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    2. Christensen, Toke Haunstrup & Friis, Freja & Bettin, Steffen & Throndsen, William & Ornetzeder, Michael & Skjølsvold, Tomas Moe & Ryghaug, Marianne, 2020. "The role of competences, engagement, and devices in configuring the impact of prices in energy demand response: Findings from three smart energy pilots with households," Energy Policy, Elsevier, vol. 137(C).
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    4. Ramos, Dorel Soares & Del Carpio Huayllas, Tesoro Elena & Morozowski Filho, Marciano & Tolmasquim, Mauricio Tiomno, 2020. "New commercial arrangements and business models in electricity distribution systems: The case of Brazil," Renewable and Sustainable Energy Reviews, Elsevier, vol. 117(C).
    5. Anh-Duc Nguyen & Van-Hai Bui & Akhtar Hussain & Duc-Huy Nguyen & Hak-Man Kim, 2018. "Impact of Demand Response Programs on Optimal Operation of Multi-Microgrid System," Energies, MDPI, vol. 11(6), pages 1-18, June.
    6. Lehmann, Nico & Sloot, Daniel & Ardone, Armin & Fichtner, Wolf, 2022. "Consumer preferences for the design of a demand response quota scheme – Results of a choice experiment in Germany," Energy Policy, Elsevier, vol. 167(C).
    7. Ioana Bejan & Carsten Lynge Jensen & Laura M. Andersen & Lars Gårn Hansen, 2019. "The hidden cost of real time electricity pricing," IFRO Working Paper 2019/03, University of Copenhagen, Department of Food and Resource Economics.
    8. Seong-Kyu Kim & Jun-Ho Huh, 2018. "A Study on the Improvement of Smart Grid Security Performance and Blockchain Smart Grid Perspective," Energies, MDPI, vol. 11(8), pages 1-22, July.
    9. Anna Mengolini & Flavia Gangale & Julija Vasiljevska, 2016. "Exploring Community-Oriented Approaches in Demand Side Management Projects in Europe," Sustainability, MDPI, vol. 8(12), pages 1-12, December.
    10. Patrick Ludwig & Christian Winzer, 2022. "Tariff Menus to Avoid Rebound Peaks: Results from a Discrete Choice Experiment with Swiss Customers," Energies, MDPI, vol. 15(17), pages 1-21, August.
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    12. María del P. Pablo-Romero ,, & Rafael Pozo-Barajas & Javier Sánchez-Rivas, 2017. "Relationships between Tourism and Hospitality Sector Electricity Consumption in Spanish Provinces (1999–2013)," Sustainability, MDPI, vol. 9(4), pages 1-12, March.
    13. Imke Lammers & Lea Diestelmeier, 2017. "Experimenting with Law and Governance for Decentralized Electricity Systems: Adjusting Regulation to Reality?," Sustainability, MDPI, vol. 9(2), pages 1-14, February.
    14. Lim, Keumju & Lee, Jongsu & Lee, Hyunjoo, 2021. "Implementing automated residential demand response in South Korea: Consumer preferences and market potential," Utilities Policy, Elsevier, vol. 70(C).
    15. Jing Liang & Yueming Qiu & Poornima Padmanabhan, 2017. "Consumers’ Attitudes towards Surcharges on Distributed Renewable Energy Generation and Energy Efficiency Programs," Sustainability, MDPI, vol. 9(8), pages 1-23, August.
    16. Gupta, Rajat & Morey, Johanna, 2022. "Empirical evaluation of demand side response trials in UK dwellings with smart low carbon technologies," Renewable Energy, Elsevier, vol. 199(C), pages 993-1004.
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    18. Bejan, Ioana & Jensen, Carsten Lynge & Andersen, Laura M. & Hansen, Lars Gårn, 2021. "Inducing flexibility of household electricity demand: The overlooked costs of reacting to dynamic incentives," Applied Energy, Elsevier, vol. 284(C).

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