Towards Flexible Energy Demand – Preferences for Dynamic Contracts, Services and Emissions Reductions

40 Pages Posted: 1 Nov 2018 Last revised: 25 Nov 2018

See all articles by Enni Ruokamo

Enni Ruokamo

Government of the Republic of Finland - Finnish Environment Institute

Maria Kopsakangas-Savolainen

Finnish Environment Institute; University of Oulu - Department of Economics, Accounting and Finance

Teemu Meriläinen

University of Oulu - Department of Economics, Accounting and Finance; Government of the Republic of Finland - Finnish Environment Institute

Rauli Svento

University of Oulu - Department of Economics, Accounting and Finance

Date Written: November 19, 2018

Abstract

Households’ preferences for attributes of flexible energy demand are not well understood. This paper evaluates Finnish households’ acceptance of hypothetical contracts and services aimed at increasing demand side flexibility. We conduct a Choice Experiment to analyze households’ willingness to offer flexibility through timing their electricity usage and heating; their interest in dynamic pricing contracts such as real-time pricing, two-rate tariffs, or power-based tariffs; and how emissions reductions affect their choices. The results indicate that households’ sensitivity to restrictions in electricity usage is much stronger than their sensitivity to restrictions in heating. Households also require considerable compensation to choose real-time pricing over fixed fees. The findings suggest that room may exist in the market for new dynamic electricity distribution contracts, such as power-based tariffs. Furthermore, other value-creating elements besides monetary compensation could incentivize households to offer demand side flexibility because they value reductions in CO2 emissions at the power system level.

Keywords: flexibility, demand response, demand side management, choice experiment, consumer, power-based tariff, real-time price, direct load control

JEL Classification: D12, Q40, Q48, Q51

Suggested Citation

Ruokamo, Enni and Kopsakangas-Savolainen, Maria and Meriläinen, Teemu and Svento, Rauli, Towards Flexible Energy Demand – Preferences for Dynamic Contracts, Services and Emissions Reductions (November 19, 2018). Available at SSRN: https://ssrn.com/abstract=3263517 or http://dx.doi.org/10.2139/ssrn.3263517

Enni Ruokamo (Contact Author)

Government of the Republic of Finland - Finnish Environment Institute ( email )

Latokartanonkaari 11
Helsinki, 00790
Finland

Maria Kopsakangas-Savolainen

Finnish Environment Institute ( email )

PO Box 413
Oulu, 90014
Finland

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Teemu Meriläinen

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

HOME PAGE: http://www.oulu.fi/yliopisto/tutkija/teemu-merilainen

Government of the Republic of Finland - Finnish Environment Institute ( email )

00260 Helsinki
Finland

Rauli Svento

University of Oulu - Department of Economics, Accounting and Finance ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

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