Costs of Demand Response from Residential Customers’ Perspective

Abstract

Electricity demand in a certain locality varies during the day, depending on weather conditions, daily life routines, or a social event in a town. During high/peak demands, expensive power plants are put into operation, which affects electricity prices. Moreover, power lines are overloaded. If generation capacity is insufficient, a blackout may result. Demand response (DR) programs are widely proposed in energy research to tackle these problems. Although the benefits of DR programs are well known, customer response levels to these programs is low. This is due to the small fraction of benefits they receive against the loss of comfort, lost leisure time, and other inconveniences. The objective of this work is to study DR costs from the customer perspective by considering these factors. A customer survey-based direct approach is used to evaluate the willingness of customers to accept (WTA) a certain compensation when shifting the load is adopted. Two different methods are used to calculate DR costs: percentage compensation, which customers are WTA, and one based on a macroeconomic model, which considers the dependency factor of customers on loads and hourly wage. A linear mathematical model is presented based on both these techniques. This study reveals that DR costs are much less than interruption costs paid by the utility company, and hence is in the best interests of all stakeholders, i.e., customers, utility company, and transmission company.