Elastic Prices and Volatile Energy Generation : Building and evaluating a regional demand response model

New possibilities are developing in the infrastructure of electrical systems to meet the new demand of more volatile power generation. This study focuses on German household reactions to price changes and their economic and renewable utilization effects. In order to model the effects of flexible prices in the Freiamt region, the basic research – including interviews and data collecting – is carried out in the fields of economics and renewable energy. An elasticity model based on the Spees and Lave study in used to simulate consumer behaviour to changing prices. Two pricing structures with daily and hourly changing prices are found to lower the average electrical prices in both cases. These benefits are larger overall with the hourly price changes when all other variables are kept constant. This study finds that the changes to load patterns also seem to correlate with the local renewable energy production. Results suggest that this specific form of energy generation benefits from consumer reactions to changing prices during 2007 and 2008. In order to validate these results the model should be expanded to include a more differentiated load from different sectors and to include a wider range of the electrical prices advertised to the consumer. However, under given circumstances, this study concludes that using more renewable power generation is possible both generally with daily price changes and also more specifically with hourly changing prices at a more competitive market price