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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
  • 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 predetermined 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 & Frances R. Homans, 2017. "Price Responsiveness in Electricity Markets: Implications for Demand Response in the Midwest," The Energy Journal, , vol. 38(1), pages 23-50, January.
    • Handle: RePEc:sae:enejou:v:38:y:2017:i:1:p:23-50
    DOI: 10.5547/01956574.38.1.dery
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    References listed on IDEAS

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    1. Dermot Gately & Hiliard G. Huntington, 2002. "The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 19-55.
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