Is More Information Better than Less? Understanding the Impact of Demand Response Mechanisms in Energy Markets

12 Pages Posted: 6 Aug 2018

Date Written: July 17, 2018

Abstract

Due to the integration of intermittent resources of power generation such as wind and solar, the amount of supplied energy will show unprecedented fluctuations. Electricity retailers can partially meet the challenge of matching demand and volatile supply by shifting power demand according to the fluctuating supply side. This so-called Demand Response mechanism requires innovations in Information Systems such as Advanced Metering Infrastructures. Whereas the technology side of these infrastructures is relatively well understood, further effort, to quantify the economic dimension of Demand Response, is strongly needed. Therefore, we present the foundation of a Demand Response system to model both costs and revenues based on-real world data. Although our model suggests that an average energy retailer faces initial setup costs for the infrastructure of up to €24 million, we provide evidence that savings from load shifting exceed the running costs of the Information System significantly – by more than €250k per year. With higher information granularities, revenues from Demand Response increase further. However, this effect is countervailed by disproportionately growing communication costs and opposes the common expectation that more information is better than less.

Keywords: Green IT/IS, Business Value of IS/Value of IS, Demand-Side, Information Systems, Decision Making/Makers

Suggested Citation

Feuerriegel, Stefan and Bodenbenner, Philipp and Neumann, Dirk, Is More Information Better than Less? Understanding the Impact of Demand Response Mechanisms in Energy Markets (July 17, 2018). Available at SSRN: https://ssrn.com/abstract=3215407 or http://dx.doi.org/10.2139/ssrn.3215407

Stefan Feuerriegel (Contact Author)

ETH Zürich ( email )

Weinbergstr. 56/58
Zürich, 8092
Switzerland

HOME PAGE: http://www.mis.ethz.ch/

Philipp Bodenbenner

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Germany

Dirk Neumann

University of Freiburg ( email )

Albert-Ludwigs-Universität Freiburg, Wirtscha.inf.
Kollegiengebäude II, Platz der Alten Synagoge
Freiburg im Breisgau, 79098
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
28
Abstract Views
315
PlumX Metrics