Households' self-selection in a voluntary time-of-use electricity pricing experiment

Transcription

1 Housholds' slf-slcton n a voluntary tm-of-us lctrcty prcng xprmnt Torgr Ercson * Norwgan Unvrsty of Scnc and Tchnology, Dp. of Elctrcal Powr Engnrng, N-749 Trondhm, Norway. Optonal tm-dffrntatd lctrcty rats may only attract consumrs that us lttl lctrcty n pak hours and much lctrcty n off-pak hours. Elctrc utlts mght thn loos rvnus snc th consumrs can bnft from th rat structur wthout changng thr consumpton pattrns. On th othr hand, th rats may also attract consumrs wth gratr ablty and motvaton to rspond to th varyng prcs. In ths cas, utlts wll xprnc pak load rductons, whch s th ntnton of th rats. Ths papr uss a logstc rgrsson modl to nvstgat th charactrstcs of lctrcty consumrs that hav dcdd to thr partcpat n a dynamc TOU rat xprmnt or to rman on thr tradtonal tarff. Th rsults ndcat that consumrs do not consdr thr consumpton pattrns whn makng dcsons. Furthrmor, th rsults ndcat that th houshold most lkly to jon a smlar TOU program s a larg famly, lvng n a dtachd hous of nwr dat and of smallr sz, wth only lctrcty for hatng, and wth ncom n th lowr rang.. INTRODUCTION Tm-dffrntatd lctrcty rats ar ncrasngly offrd rsdntal lctrcty consumrs. Th ntnton s to motvat th consumrs to rduc consumpton n pak prods of th day whn rats ar hgh, and nstad shft usag to off-pak prods whn rats ar low. If th consumrs rspond to th prc sgnals, utlts wll xprnc rducd load n constrand prods, flattr load curvs, and mght thn dfr costly nvstmnts n nw gnraton and/or transmsson capacty. Th rats can b dsgnd n varous ways. Th most common s th tm-of-us (TOU) rat, whch nhabt a prc structur wth prcs that vary by blocks of hours of th day. A mor dynamc vrson s th crtcal-pak prcng rat. Ths s ssntally a TOU rat, but wth th possblty of mposng xtra hgh prcs f th systm s abnormally constrand, for nstanc n cold prods of th wntr. Wth tm-dffrntatd rats, consumpton nd to b mtrd as oftn as th prc changs, whch mght b svral tms a day, dpndnt on th prc structur. Tradtonal standard tarffs howvr, usually vary only a fw tms a yar, and lctrcty consumpton ar typcally rad manually onc a month or mor rarly. Hnc, bfor tm-dffrntatd rats can b ntroducd, utlts hav to chang old mtrs wth nw, and, stablsh routns to admnstrat th larg amount of consumpton masurmnt data. Ths s costly, and utlts want to know whthr bnfts from th nw mtrs and prcng schms wll xcd th costs. Cost-bnft analyss oftn hng on th consumrs' rsponss to th changng prcs (Faruqua and Gorg, 2002). Thus, for nw rat programs to prov proftabl t s mportant to attract consumrs that ar prc rsponsv. Howvr, whn th rats ar offrd on a voluntarly bass, t s possbl that only consumrs wth lttl lctrcty usag durng pak prc hours and much lctrcty usag durng off-pak prc hours wll slct th rats. Such * Tl: Fax: E-mal: torgr.rcson@rmbra.no. I am gratful to Bnt Halvorsn, Kjtl Tll, Gang Lu and Knut Rdar Wangn for hlp and valuabl dscussons. Many thanks to Statstcs Norway, Rsarch Dpartmnt for thr hosptalty and support. I acknowldg fnancal support from Nordc Enrgy Rsarch, Th Rsarch Councl of Norway, Norwgan Unvrsty of Scnc and Tchnology, Statntt and Rmbra AS

2 consumrs mght bnft by smply slctng th nw tarff, and contnu usng lctrcty as bfor wthout changng thr lctrcty consumng bhavor. As dscussd by Tran and Mhrz (995), utlts wll n ths cas not xprnc load rductons, whl at th sam tm rduc rvnu. In turn, thos losss wll typcally b shftd to th rst of th customrs by a gnral rat ncras. An mportant quston s; to what xtnt wll tm-dffrntatd tarffs only attract consumrs wth advantagous load curvs that alrady us lttl lctrcty n pak prods and much lctrcty n off-pak prods? Ths slf-slcton ssu can b nvstgatd by tstng whthr housholds' daly pak to off-pak consumpton rato s takn nto consdratons whn makng partcpaton dcsons. If t turns out that a low pak/offpak rato s corrlatd wth th dcson, stmatons of th customrs' prc rsponsvnss should tak ths nformaton nto account to avod possbl basd stmat. Th slf-slcton ssu has bn dalt wth n only a fw paprs analyzng TOU xprmnts. Agnr and Ghal (989) analyzd fv TOU xprmnts. Thy found that hgh pak prod consumpton n th pr-xprmnt prod rsultd n lowr partcpaton rat and that hgh off-pak consumpton rsultd n th oppost. Tran t al. (987) found smlar rsults n thr analyss of consumrs' rat choc. Thy usd a choc modl that ncludd th cost dffrntal btwn TOU and standard rats for a fxd lvl of lctrcty consumpton. Thy found th probablty of choosng TOU rats to dcras f th costs undr thos rats ncrasd. Howvr, Cavs t al. (989) found consumpton pattrns not to nflunc th rat choc. Thy analyzd data from a voluntary rsdntal TOU xprmnt, and compard thr fndngs wth rsults from arlr mandatory TOU programs. Thy found that voluntrs do not tak bttr advantag of partcpaton n such programs than th rst of th populaton wthout shftng usag. Thr stmatd substtuton lastcts wr much hghr than lastcts found n mandatory xprmnts, and xpland th partcpaton dcson by a gratr ablty of voluntrs to adjust thr consumpton to th varyng prcs. In ln wth ths fndng, Balad t al. (998) compard consumpton pattrns of voluntrs and non-voluntrs from a pr-tst prod n a TOU xprmnt. Thy found that on-pak usag shars wr ndstngushabl btwn th two groups, and thrfor th slf-slcton ssu appard to b nsgnfcant. Anothr analyss com from th ongong Enrgy-Smart Prcng Plan program, run by Th Communty Enrgy Coopratv. Thy offr rsdntal lctrcty customrs markt-basd, hourly prcs. Analyss of th program found dffrncs btwn partcpants and non-partcpants whch affctd th dcson to partcpat n th program. Howvr, th dffrncs wr not corrlatd wth th rspons to th hourly nrgy prcs (Summt Blu Consultng, 2004). Th mxd rsults from th dscusson abov suggst that smlar analyss should b carrd out n ach xprmnt. In addton to th ssu of possbl slf-slcton basd on advantagous load pattrn, t s usful to hav knowldg of th charactrstcs of housholds most wllng, and housholds most rluctant to jon a rat program f t s to b offrd consumrs on a voluntarly bass. If for xampl only small-consumpton housholds slct th nw rats, load rductons mght b lss n absolut trms than f larg-consumpton housholds slct th rats. Evrythng consdrd, ncrasd knowldg about housholds that voluntr for th rats wll gv utlts a bttr dcson bass whn dcdng whthr mplmntng nw mtrs and tarffs or not. Ths papr analyss data from a Norwgan tm-dffrntatd prcng xprmnt, whr a dynamc TOU ntwork tarff was offrd rsdntal lctrcty consumrs as an optonal tarff. Th am of th analyss s to assss th housholds' charactrstcs and try to rval whch mght xplan th choc of partcpaton n th rat program. Th customrs' avrag pak to off-pak lctrcty consumpton rato wll b an mportant varabl to xplan whthr lctrcty consumpton n ach TOU prod was a part of th consumrs' partcpaton dcson whn choosng th rats. Th customrs' soco-dmographc charactrstcs wll b mportant to charactrz consumrs that ar most wllng and most rluctant to voluntr for such rat programs. A qualtatv logstc rspons modl s usd to stmat th dcson procss.

3 2. EXPERIMENT AND DATA Dynamc tm-of-us prcng of rsdntal lctrcty consumpton was tstd n a larg-scal Norwgan xprmnt n Rsdntal lctrcty consumrs had nw tchnology nstalld that nabld hourly automatc mtrng of consumpton. Th housholds could choos a dynamc TOU ntwork rat or chos to rman on thr standard flat ntwork rat. Th rat was dynamc n th sns that t was actvatd whn tmpratur fll blow - 8 C. Whn actvatd, t had a two-lvl rat structur wth a pak prc of NOK n hour 8- (7 am - am) and hour 7-20 (4 pm - 8 pm) on workng days durng wntr, and an offpak prc of approxmatly NOK 0.3 n all othr hours n wknds and holdays, and n summr 3. Whn tmpraturs wr abov -8 C, th rat was constant on a lvl somwhat lowr than th standard ntwork tarff. 4 A day could thus b sparatd n two dffrnt prcng prods, an off-pak and a pak prod. Th off-pak prod was th hours -7, th hours 2-6 and th hours Th pak prod was th hours 8-, and th hours On of th goals by th analyss n ths papr s to nvstgat whthr th housholds' consumpton pattrn wr a part of th dcson procss wth rspct to thr partcpaton n th projct. To analyz ths ssu, on should prfrably hav consumpton data from th tst group and a control group that both wr on thr tradtonal standard tarffs, from th prod whn thy mad thr dcson. Unfortunatly such data dos not xst. Instad, data from two months, Novmbr and Dcmbr 2003, ar utlzd bcaus tmpraturs nvr fll blow th -8 C lmt n ths prod. Th dynamc TOU rat was consquntly not n ffct, and th customrs facd prcs smlar to th control group on th standard tarff. Thus, thy had no ncntv to adjust thr daly load pattrn to varatons n th prc. It s thrfor assumd that durng ths prod, th tst group bhavd n th sam mannr as thy dd pror to th tst prod wth rspct to thr hourly lctrcty consumpton. Ths maks t possbl to tst th hypothss about housholds makng partcpaton dcsons basd on thr daly load pattrn. As just dscrbd, th TOU rat had two dffrnt prc lvls durng a day. If housholds consdrd thr consumpton pattrn whn thy dcdd to partcpat, t s rasonabl to xpct thm to do so basd on thr usag n th sam two prods. To ndcat th rlaton btwn th consumpton n ach prod, a daly pak/off-pak consumpton rato s calculatd for ach houshold. Th avrag of ths rato for th whol Novmbr and Dcmbr months s usd to approxmat th rato that th consumrs basd thr partcpaton dcson on. In addton to th lctrcty consumpton rato, data from a survy ar usd to nvstgat othr charactrstcs that mght hav nfluncd th dcson. Ths s nformaton about typ of dwllng, typ of hatng qupmnt, ag of th dwllng, squar mtr of th dwllng, numbr of popl n th houshold and total ncom of th houshold. Som dscrptv statstcs for 48 housholds n th tst group that chos th dynamc TOU rat and 9 housholds n th control group that rmand on thr standard rat ar gvn n Tabl. Aftr th drgulaton of th Norwgan lctrcty markt n 99, ntwork and powr compans wr sparatd. Customrs now rcv on bll from thr local ntwork supplr, and on from a powr supplr that can b frly chosn among comptng compans. A consumr's total lctrcty prc wll thrfor b mad up of th ntwork prc plus th powr prc (plus taxs and VAT). 2 NOK ~ EUR VAT s not ncludd. Summr was dfnd as th months May to Octobr, and wntr as Novmbr to Aprl. 4 Th standard ntwork rat was approxmatly NOK 0.5.

4 Tabl : Summary statstcs of housholds' lctrcty consumpton and charactrstcs for th tst group and th control group Tst group: dynamc TOU rat Control group: standard rat Numbr of housholds 48 9 Bnary varabls Prcnt Prcnt Dwllng: Dtachd Dwllng: Sm-dtatchd Dwllng: Row Dwllng: Flat Hatng: Not l Hatng: El + substtuton Hatng: Only l Incom: Incom: Incom: Incom: Contnuous varabls Man Std. Dv. Man Std. Dv. No of houshold mmbrs Ag of Dwllng [yar] Sqm of Dwllng [m 2 ] El [kwh/h] Pak/Off-pak El rato From Tabl w can dscrb som of th charactrstcs of housholds n th tst group and n th control group. W s that th avrag daly pak/off-pak lctrcty consumpton rato s almost th sam for th two groups, but, th avrag lctrcty consumpton lvl ar largr for th tst group than t s for th control group 5. Whn t coms to dwllng typ, w s th prcntags shar of housholds lvng n dtachd houss ar largr n th tst group than t s n th control group, whl th shar lvng n sm-dtachd houss and flats ar smallr. Th shar of row houss s qut smlar for th two groups. Th housholds' hatng qupmnt s dvdd nto thr groups; dwllngs wth no lctrcty for hatng purposs, dwllngs wth lctrcty and substtuton possblts (ol and gas or wood-frng), and dwllngs wth only lctrcty for hatng. In both th tst and th control group, th man part of th housholds has som knd of hatng possblts bsds lctrcty. Th shar n th two groups do not dffr much (ca 80%). Howvr, th shar of housholds wthout lctrcty as a hatng sourc n th tst group ar only a thrd of what t s n th control group, and th prcntags shar of housholds wth only lctrcty as a hatng sourc ar somwhat largr n th tst group. For th total houshold ncom varabls, w s th prcntags shar n th lowst ncom group (ncom lss than NOK ) s blow half as many n th tst group as n th control group, whl narly twc as larg n th scond lowst ncom group. W also s that th two groups do not dffr much for th two hghst ncom lvls. Furthr, th numbr of houshold mmbrs n th tst group s on avrag largr than n th control group. At last, w s th dwllngs of th housholds n th tst group ar youngr than n th control group, but th squar mtr ar of about th sam sz. 3. METHOD AND MODEL Ths scton dscrbs th mthodology and th modl usd to stmat th housholds' partcpaton dcson. 5 Only masurmnts from workng days ar usd.

5 Lt V * dnot a latnt varabl that dtrmns th housholds' choc of rmanng on th tradtonal tarff, or slctng th dynamc TOU tarff. Ths s formulatd by a houshold dcson functon V * = x β+ε =, N whr x s a vctor of xplanatory varabls for houshold ; avrag pak/off-pak lctrcty consumpton rato and othr soco-dmographc varabls gathrd n th survy dscrbd prvously. ε s a logstc dstrbutd rror trm. Howvr, V * s not obsrvd, so an obsrvabl bnary ndcator, V, s usd to masur th housholds' choc as V * f V > 0 = 0 othrws I.. w obsrv th outcom V = f th houshold slctd th nw tarff, prsumably as a rsult of an valuaton of utlty bng gratr on th nw tarff, and V =0 as a rsult of th oppost consdraton. Th customrs' choc s modld by a qualtatv logstc rspons modl, whch stmats th probablts for th outcoms P[V = x ] = xβ x β + and P[V =0 x ] = x β + By usng maxmum lklhood, th jont probablty of obsrvng th sampl s maxmzd wth rspct to th paramtrs β, as: N = V V { P ( P ) } max = β N x max β = + β xβ V + xβ V 4. RESULTS AND DISCUSSION Th rsults from th logstc rgrsson usng Stata 8.0 ar shown n Tabl 2. Tabl 2: Rsults from th logstc rgrsson Varabl Cof. Std. Err. P> z Pak/Off-pak El rato Dwllng: Sm-dtatchd Dwllng: Row Dwllng: Flat Hatng: El + substtuton Hatng: Only l Incom: Incom: Incom: No of houshold mmbrs Ag of Dwllng Sqm of Dwllng Constant Log lklhood = LR ch2(2) = Psudo R2 = Prob > ch2 = Not: Dtachd dwllng, Hatng wthout lctrcty, and Incom ar takn out to avod multcollnarty.

6 Th stmat n Tabl 2 of th pak/off-pak rato of lctrcty consumpton has a ngatv sgn, whch ndcats th rluctanc of consumrs wth larg pak and low off-pak consumpton to partcpat n th xprmnt. Howvr, th stmat s far from bng sgnfcant. Ths fndng suggsts that th housholds voluntrng for th TOU rat dd not tak thr consumpton n th pak and off-pak prods nto consdraton whn thy slctd th TOU rat. From th othr stmats w fnd that housholds lvng n dtachd houss ar th on most lkly to partcpat n th xprmnt, compard wth thos lvng n othr typ of dwllngs. Th housholds lvng n flats wr comparably last lkly to chos th TOU rat. Th ngatv stmat of th dwllng sz coffcnt ndcats that th largr th dwllng s, th lss lkly s t for th houshold to partcpat. Sn togthr wth th last dscrbd rsults, th dwllng sz stmat may b ntrprtd as t s housholds n smallr dtachd houss that ar most lkly to partcpat. Th ngatv coffcnt of th ag of th dwllng ndcats that th oldr th dwllng s, th lss lkly t was for th houshold lvng thr to partcpat n th xprmnt. Th varabl that ndcats th numbr of popl n th housholds hav a postv sgn, whch suggst that th largr th famly s, th mor lkly t s for thr partcpaton n th projct. Howvr, th stmat s not sgnfcant. Whn t coms to ncom, th rsults ndcat that housholds wth th lowst total ncom wr th on last lkly to slct th nw rats. Nvrthlss, th rsults for th two hghst ncom groups ar not sgnfcantly dffrnt from th lowst ncom group. Comparably, th group most lkly to partcpat was th on wth an ncom btwn NOK 250,000 and 500,000,.. th scond lowst ncom group. As a summary of thos rsults t looks lk th houshold that most lkly wll jon a smlar xprmnt s a larg famly, lvng n a dtachd hous of nwr dat and of smallr sz and wth only lctrcty for hatng. Also, thr ncom s n th lowr rang, but not n th lowst ncom group. Thy do not consdr thr consumpton pattrns durng th day whn thy dcd whthr to partcpat or not. Othr xplanatory varabls wr also tstd n th modl. Th avrag lctrcty consumpton lvl gav far from sgnfcant rsults. Dffrnt famly typs, such as famly wth chldrn, coupls wthout chldrn or pnsonrs dd nthr xplan th partcpaton dcson. Aganst what on could blv dd ownrshp of strng systm for th lctrcty consumpton not xplan th partcpaton dcson. 5. CONCLUSION A logstc rgrsson modl has bn usd to nvstgat th charactrstcs of housholds that voluntrd for a Norwgan dynamc TOU rat program, and of housholds that dd not want to partcpat. Elctrcty consumpton masurmnts and nformaton from a survy has bn usd to xplan th housholds' partcpaton dcson. Th rsults ndcat that th daly pak to off-pak consumpton rato has not bn a part of th consdraton whn th housholds mad thr dcson of whthr to slct th TOU rat or not. Th stmats of th othr charactrstcs can b summd up as: th houshold most lkly to partcpat n a smlar xprmnt s a largr famly, lvng n a dtachd hous of nwr dat and of smallr sz and wth only lctrcty for hatng. Also, thr ncom s n th lowr rang, but not n th lowst ncom group. REFERENCES Agnr, J.A. and K. Ghal Slf-slcton n th rsdntal lctrcty tm-of-us prcng xprmnts. Journal of Appld Economtrcs. 4: S3-S44 Balad, S.M., J.A. Hrrgs and T.J. Swny Rsdntal rspons to voluntary tmof-us lctrcty rats. Rsourc and Enrgy Economcs. 20: Cavs, D.W., J.A. Hrrgs and K.A. Kustr Load Shftng Undr Voluntary Rsdntal Tm-of-Us Rats. Th Enrgy Journal. 0 (4): 83-99

7 Faruqua, A. and S.S. Gorg Th Valu of Dynamc Prcng n Mass Markts. Th Elctrcty Journal. July: Tran, K.E., D.L. McFaddn and A.A. Gott Consumr atttuds and Voluntary Rat Schduls for Publc Utlts. Th Rvw of Economcs and Statstcs. 69 (3): Tran, K. and G. Mhrz Th mpacts of optonal tm-of-us prcs: a cas study. Enrgy and buldngs. 22: Summt Blu Consultng, 2004, Evaluaton of th Enrgy-Smart Prcng Plan. Colorado