Industrial customer response to wholesale prices in the restructured Texas electricity market

• Published in: Energy (Oxford) Vol. 32; no. 9; pp. 1715 - 1723
• Main Authors: Zarnikau, J., Landreth, G., Hallett, I., Kumbhakar, S.C.
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 01.09.2007; Elsevier Science
• Subjects: Applied sciences; Demand response; Economic data; Electric energy; Energy; Energy economics; Exact sciences and technology; General, economic and professional studies; Price elasticity of demand for electricity; Real-time pricing; Symmetric generalized McFadden demand function; Wholesale electricity markets; United States; North America; Texas; America; Demand response; Wholesale electricity markets; Price elasticity of demand for electricity; Real-time pricing; Symmetric generalized McFadden demand function; Demand; Case study; Electricity; Price; Statistical model; Pricing; Electric power consumption; Econometric model; Wholesale market; Secondary sector; Ratio of economic flexibility; Real time system
• ISSN: 0360-5442
• DOI: 10.1016/j.energy.2007.01.006

This paper estimates the demand responsiveness of the 20 largest industrial energy consumers in the Houston area to wholesale price signals in the restructured Electric Reliability Council of Texas (ERCOT) market. Statistical analysis of their load patterns employing a Symmetric Generalized McFadden cost function model suggests that ERCOT achieved limited success in establishing a market that facilitates demand response from the largest industrial energy consumers in the Houston area to wholesale price signals in its second year of retail competition. The muted price response is at least partially because energy consumers who opt to offer their “interruptibility” to the market as an ancillary service are constrained in their ability to respond to wholesale energy prices.