Price elasticity in electricity consumption denotes the shifting of electricity from one tariff pricing zone to a different tariff pricing zone relative to the price different as a co-efficient.
The questions that thus arose for the moma research and demonstration were: How high does a price spread has to be in order for customers to react in the first place or to react to a certain extent?
After having concluded two pre-trials with relatively easy time-of-use tariffs, the moma consortium introduced a highly complex real time pricing tariff for its large scale final field test with over 700 households in the Mannheim area. The RTP tariff included 31 pricing zones (equaling a price spread of a maximum of 31 cents) that were distributed differently every day. In order for the customers to not lose their sense of comfort regarding their electricity consumption and to maximize the use of the flexibility potential, the households were equipped with an automated energy management system (EMS) called the “Energie Butler” that could schedule their flexible applications automatically according to the ever changing price incentives.
The RTP tariff was designed to achieve several goals. The consumption of the customers was adapted in order to:
- optimize the load on the distribution system load,
- improve the integration of DER units and
- to improve buying processes at the EPEX spot market forward better prices to consumers.
Since the future state of Mannheim’s distribution network is still unclear and future market rules at distribution level remain largely untested and not backed by regulatory or legal framework, the consortium opted to test how much influence price signals implemented manually and supported with an automated energy management system can actually exert on the consumption of residential customers. In fact, the different sequences of pricing zones were chosen randomly on a daily basis. However, the plausibility of those price sequences was respected, which means that big leaps in the pricing of back-to-back pricing zones were avoided.
Figure 1 indicates a selection of implemented tariff structures that are marked by ever occurring changes in prices on a 60 minute basis and a high plausibility.
Figure 1 - 5 example tariff structures implemented in the 3rd moma field trial
Even though the tariff was highly complex and difficult to follow for customers, nearly half of the households that took part in the field trial indicated that they were sincerely interested in maintaining the new tariff arrangement after the field trial’s conclusion. Only about 10 per cent of participants would reject the idea of being billed in a variable tariff scheme altogether. For most participants, the motivation of adhering to the price signals lay in financial saving potentials. At the end of the field trial, 99 per cent of the household could receive a bonus payment based on how they fared during in translating the price signals into action and load shifts, i.e. on how much electricity consumption they could shift from more to less expensive tariff pricing zones. The savings obtained by the different household ranged between 0,52 € and 44,71 € per month. For the very successful participants that could achieve up to more than 40€/months in savings, a quick amortisation of the new smart grid-ready equipment is feasible and lucrative. However, the tariff incentives they received are not necessarily reflecting actual events and realities in the current energy economy. The results with regard to (realistic) monetary saving potential, thus, have to be considered with perspective.
The results, however, with regard to price elasticity are clear and significant: On average, the moma households customers reacted to a price increase of 100 per cent (i.e. from 9ct/kWh to 18 c t/kWh) with a consumption reduction of 1 per cent. Figure 2 sums up the results obtained by the researchers with regard of how the customers’ average price elasticity developed throughout the day.
Figure 2 - Results on price elasticity with regard to time of day
These results apply to the two different active customer groups that became evident throughout the field trial’s lifecycle: those customers that reacted to price incentives manually and made use of the automated support by the energy butler and those customers that only reacted to the price incentives and manually. In addition to these two groups, the consortium could also deduce that a part of the households connected to their ICT infrastructure remained passive throughout the field trial and reacted neither manually nor with the aid of the energy butler to the tariff incentives.
Figure 3 suggests the differences between the groups.
Figure 3 - Price elasticity of the different customer groups
The reason why some customers abstained from making use of the automated energy management system lay in technical difficulties that were experienced by the consortium and the field test customers after the initial rollout of the technologies at the customer’s premises. Thus derives one of the further major conclusions of the moma consortium: the reliability of the technological components must be ensured from the beginning, in order to avoid a perceived loss of trust in the new devices by the customers. The Energy Butler management system based on the open OGEMA platform system developed by the consortium partners Fraunhofer IWES and MVV Energie has been continually optimized throughout the field trial and now works reliably.
However, both groups, those that did use the energy manager to schedule their controllable appliances and those that only trusted in their own actions have shown that they could achieve loadshifts of up to 35 per cent during certain times of the day, namely in the early evening hours. Figure 3 renders an overview. The graphics indicates a competitive edge of the automated approach: during the usual load peak hours, an automated approach is even more effective in rescheduling individual applications away from the peaks and into cheaper tariff zones.
The Energy Butler and the underlying OGEMA platform are thus being further developed by Fraunhofer IWES and MVV Energie to become ready for market entrance within the next years.
Model City Mannheim
Dr. Robert Thomann, MVV Energie AG
Technologie & Innovation
Luisenring 49, 68159 Mannheim