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  • 1.
    Broberg, Thomas
    et al.
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics. Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    Brännlund, Runar
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics. Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    Kazukauskas, Andrius
    Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).
    Persson, Lars
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics. Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics. Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    An electricity market in transition: demand flexibility and preference heterogeneity2015Report (Other academic)
    Abstract [en]

    In a recent report to the Swedish Energy Markets Inspectorate (Broberg et al., 2014) consumer behavior and consumer flexibility concerning energy use were analyzed. Two main conclusions were drawn. First, electricity consumption follows a regular pattern over the day, week, and year, which to a large extent reflects household living patterns and climate variations over the year. Second, the average household needs a substantial economic compensation to voluntarily reschedule its electricity use away from peak demand hours. The required compensations were found to be far higher than the economic incentives households face today when exposed to real-time pricing. In addition, it was found that households are more flexible in the use of electricity for heating than in the use of electrical appliances. Finally, households were found to be more flexible during the morning peak hours than during the evening hours. These findings led to the overall conclusion that both the possibilities and incentives are such that we cannot expect any substantial change in energy use patterns from technical reforms that creates incentives for demand response in line with the current price variation on the wholesale market for electricity.

    In the above-mentioned report we also analyzed people’s attitudes towards information dissemination. We concluded that many households do not wish to have their electricity use scrutinized by experts and other households. We found that people, on average, required a compensation to allow such information sharing. Again, new technologies open for various demand response policies, although it does not necessarily imply substantially higher demand flexibility. New technologies need to be combined with consumer interest to be successful in a market economy.

    The overall objective of the current report is to further scrutinize consumer behavior and flexibility. The first part focuses on Swedish households’ choice of electricity supplier contracts. Specifically, we analyze what types of households choose a fixed price contract. 1 The choice of contract implicitly reveals a consumer’s flexibility since a fixed price contract works as an insurance against price variation. So, by studying what type of households chose a fixed price contract we are able to infer on which type of households are relatively inflexible. This part of the analysis is policy relevant since it touches on the question of what to expect from real-time pricing reforms. A central question is whether a household who uses relatively more electricity is more likely to have a fixed price contract. If this is the case, future access to real-time pricing and a greater price variation may not be a guarantee for a substantial increase in demand response as important consumers (from a policy perspective) are more likely to insure against such circumstances. From this perspective the market for price insurances (fixed price contracts) is a market for inflexibility.

    While the analysis above considers the effectiveness of future energy policies to promote demand response, it is also relevant to study the question of how the peak demand problem may develop over time. This question is explicitly addressed in the current report by studying how consumer behavior varies across income levels. The existing literature suggests that electricity consumption is positively related to income, although the income elasticity 2 is fairly small. However, almost all studies concerning income effects have studied aggregate electricity use on monthly or yearly basis. The present study departs from the existing literature by studying how daily household electricity use patterns vary across income levels. This approach is novel since it allows us to analyze how the peak load problem may develop in the future as a result of higher income levels, which is commonly expected.

    By studying the choice of electricity contracts and by estimating hourly income elasticities, the report approach demand flexibility in an indirect way. In the third analysis of the report we address these issues again, although with a somewhat more direct approach. The choice experiment part in Broberg et al. (2014), which focused on the economic incentives needed in order to change people’s energy consumption in a predefined way, is now deepened. The focus is on how socio-economic factors such as e.g. age, gender, education and income may explain preference heterogeneity among the Swedish population. Energy related factors such as living conditions and heating systems are also considered in the analysis. This analysis will inform us about what types of households are inclined to reschedule their energy use when given relatively small economic incentives, and what household’s that are relatively inflexible and thus require large compensations to change their behavior. We also study preference heterogeneity regarding information dissemination in purpose of anonymous peer comparisons.

    In the final part of the report we deepen our analysis of households’ demand for information about their own and others electricity use. Besides creating incentives for demand response, new technologies included in the smart grid concept also make it possible for policy makers to use tailored information to help consumers to use energy more efficiently. A number of studies highlight inefficiencies in the households’ use of energy (see e.g. Broberg and Kazukauskas, 2014). One highlighted reality is that people seem to pay little attention to energy issues. Of course, if people pay little attention to the price of electricity, the effectiveness of policy measures that work through the pricechannel is limited. In this part of the report we address four basic questions of great relevance for energy efficiency policies worldwide. The questions are (1) What knowledge do people have about the marginal cost of electricity use in terms of everyday electrical appliances? (2) Are the cost perceptions biased and in what direction? (3) Do inattention to energy issues play a significant role in this bias? (4) Do households want information that may help them de-bias their perceptions about energy costs and use?

    The report is structured such that section 2 gives a brief background on the issues analyzed in the report. The following sections correspond to the issues outlined in the introduction. Section 7 works to tie the analyses together and conclude our results

  • 2.
    Broberg, Thomas
    et al.
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE). Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    Brännlund, Runar
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE). Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    Kazukauskas, Andrius
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE). Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    Persson, Lars
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics. Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE). Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    En elmarknad i förändring: är kundernas flexibilitet till salu eller ens verklig?2014Report (Other academic)
    Abstract [sv]

    I rapporten ”En elmarknad i förändring – Är kundernas flexibilitet till salu eller ens verklig?” tittar en forskargrupp vid Centrum för Miljö- och Naturresursekonomi (CERE) vid Handelshögskolan, Umeå Universitet på konsumenternas nuvarande och framtida roll på elmarknaden. Rapporten är beställd av Energimarknadsinspektionen.

  • 3.
    Kiran B. Krishnamurthy, Chandra
    et al.
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE). Beijer Institute of Ecological Economics, The Royal Academy of Sciences, Stockholm.
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    Bayrak, Oben
    Department of Forest Economics, SLU, Umeå.
    Determinants of Residential end-use electricity demand: Evidence from SwedenManuscript (preprint) (Other academic)
    Abstract [en]

    Using a household appliance metering data set from the Swedish Energy Agency, this paper focuses on understanding the determinants of end-use electricity demand for Sweden. The focal point of the analysis is the estimation of end-use-specific income elasticity of electricity demand, for the first time for Sweden. A seemingly unrelated regression framework is used for understanding the determinants of end-use demand, with the end-uses being heating, kitchen, lighting, and residual. The main results of the analysis are: high aggregate elasticity (above 0.6), and very high income elasticity of electric heating (above 0.8). Other size-related variables (size of home, number of people) do not appear to have significant explanatory power. Overall, our analysis indicates that income is a key factor determining the demand for electricity, and to a much larger extent than usually considered

  • 4.
    Lanot, Gauthier
    et al.
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    An empirical model of the decision to switch between electricity price contracts2019In: Journal of Business Analytics, ISSN 2573-234XArticle in journal (Refereed)
    Abstract [en]

    In this paper, we explore how sensitive the timing of switches between electricity contracts is to current and past prices. We present a model for time series of individual binary decisions which depends on the history of past and present prices. The model is based on the Bayesian learning procedure which is at the core of sequential decision-making. Given a-priori distributions of the information conditional on the state of the world, we show that the model captures dependence on past prices in a straightforward fashion. We estimate by maximum likelihood the parameters of the model on a sample of Swedish households who decide over time between competing electricity price contracts. The estimated parameters suggest that households do respond to prices by switching between contracts and that the response to price can be sizeable for alternative price processes. Importantly, the model structure implies that in general, the response to a price change will not be immediate but delayed.

  • 5.
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    Heterogeneity in price responsiveness of electricity: contract choice and the role of media coverage2017Report (Other academic)
    Abstract [en]

    In this paper, I estimate the price elasticity of electricity as a function of contract choice. Further, I explore how the  media coverage of electricity prices affects electricity demand, both by augmenting price responsiveness and as a direct effect of media coverage on electricity demand, independent of prices. The parameters in the model are estimated using a unique and detailed Swedish panel data on monthly household-level electricity consumption. I find that price elasticities range between -0.025 and -0.07 at the mean level of media coverage, depending on contract choice, and that households with monthly variation in electricity prices respond more to prices when media coverage of electricity prices is extensive. When media coverage is high, for example 840 news articles per month (which corresponds to the mean plus two standard deviations), the price elasticity is -0.12, or 1.7 times the elasticity at the mean media coverage. Similarly, media coverage is also found to have a direct effect on electricity demand.

  • 6.
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    Power to the people: electricity demand and household behavior2017Doctoral thesis, comprehensive summary (Other academic)
    Abstract [en]

    Paper [I] Using a unique and highly detailed data set on energy consumption at the appliance-level for 200 Swedish households, seemingly unrelated regression (SUR)-based end-use specific load curves are estimated. The estimated load curves are then used to explore possible restrictions on load shifting (e.g. the office hours schedule) as well as the cost implications of different load shift patterns. The cost implications of shifting load from "expensive" to "cheap" hours, using the Nord Pool spot prices as a proxy for a dynamic price, are computed to be very small; roughly 2-4% reduction in total daily costs from shifting load up to five hours ahead, indicating small incentives for households (and retailers) to adopt dynamic pricing of electricity.

    Paper [II] Using a detailed data set on appliance-level electricity consumption at the hourly level, we provide the first estimates of hourly and end-use-specific income elasticities for electricity. Such estimates are informative about how consumption patterns in general, and peak demand in particular, will develop as households’ income changes. We find that the income elasticities are highest during peak hours for kitchen and lighting, with point estimates of roughly 0.4, but insignificant for space heating.

    Paper [III] In this paper, I estimate the price elasticity of electricity as a function of the choice between fixed-price and variable-price contracts. Further, assuming that households have imperfect information about electricity prices and usage, I explore how media coverage of electricity prices affects electricity demand, both by augmenting price responsiveness and as a direct effect of media coverage on electricity demand, independent of prices. I also address the endogeneity of the choice of electricity contract. The parameters in the model are estimated using unique and detailed Swedish panel data on monthly household-level electricity consumption. I find that price elasticities range between −0.025 and −0.07 at the mean level of media coverage, depending on contract choice, and that households with monthly variation in electricity prices respond more to prices when there is extensive media coverage of electricity prices. When media coverage is high, for example 840 news articles per month (which corresponds to the mean plus two standard deviations), the price elasticity is −0.12, or 1.7 times the elasticity at the mean media coverage. Similarly, media coverage is also found to have a direct effect on electricity demand.

    Paper [IV] I explore how households switch between fixed-price and variable-price electricity contracts in response to variations in price and temperature, conditional on previous contract choice. Using panel data with roughly 54000 Swedish households, a dynamic probit model is estimated. The results suggest that the choice of contract exhibits substantial state dependence, with an estimated marginal effect of previous contractchoiceof0.96, andthattheeffectofvariationinpricesandtemperatureonthechoice of electricity contract is small. Further, the state dependence and price responsiveness are similar across housing types, income levels and other dimensions. A plausible explanation of these results is that transaction costs are larger than the relatively small cost savings from switching between contracts.

  • 7.
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    The effect of price on electricity contract choice2018In: Energy Economics, ISSN 0140-9883, E-ISSN 1873-6181, Vol. 69, p. 59-70Article in journal (Refereed)
    Abstract [en]

    I explore how households switch between fixed-price and variable-price electricity contracts in response to variations in price and temperature, conditional on previous contract choice. Using panel data with roughly 54,000 Swedish households, a dynamic probit model is estimated. The results suggest that the choice of contract exhibits substantial state dependence, with an estimated marginal effect of previous contract choice of 0.96, and that the short-run effects of variation in prices and temperature on the choice of electricity contract are small. Further, the state dependence and price responsiveness are similar across housing types, income levels and other dimensions. A plausible explanation of these results is that transaction costs are perceived to be larger than the relatively small cost savings from switching between contracts.

  • 8.
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    The effect of price on electricity contract choice2017Report (Other academic)
    Abstract [en]

    I explore how households switch between fixed-price and variable-price electricity contracts in response to variations in price and temperature, conditional on previous contract choice. Using panel data with roughly 54000 Swedish households, a dynamic probit model is estimated. The results suggest that the choice of contract exhibits substantial state dependence, with an estimated marginal effect of previous contract choice of 0.96, and that the short-run effects of variation in prices and temperature on the choice of electricity contract are small. Further, the state dependence and price responsiveness are similar across housing types, income levels and other dimensions. A plausible explanation of these results is that transaction costs are perceived to be larger than the relatively small cost savings from switching between contracts.

  • 9.
    Vesterberg, Mattias
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    The hourly income elasticity of electricity2016In: Energy Economics, ISSN 0140-9883, E-ISSN 1873-6181, Vol. 59, p. 188-197Article in journal (Refereed)
    Abstract [en]

    Using a detailed data set on appliance-level electricity consumption at the hourly level, we provide the first estimates of hourly and end-use-specific income elasticities for electricity. Such estimates are informative about how consumption patterns in general, and peak demand in particular, will develop as households’ income changes. We find that the income elasticities are highest during peak hours for kitchen and lighting, with point estimates of roughly 0.4, but insignificant for space heating.

  • 10.
    Vesterberg, Mattias
    et al.
    Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics. Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE).
    B. Krishnamurthy, Chandra Kiran
    Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). Department of Forest Economics, Swedish University of Agricultural Sciences (SLU), Umeå, Sweden.
    Böök, Herman
    Lindfors, Anders
    Svento, Rauli
    Real-time pricing revisited: Demand flexibility in the presence of micro-generation2018In: Energy Policy, ISSN 0301-4215, E-ISSN 1873-6777, Vol. 23, p. 642-658Article in journal (Refereed)
    Abstract [en]

    An understanding of household demand response (DR) is important in view of increasingly smart grids in which high shares of renewable supply are being promoted. In addition, an important development in the Nordic market relates to increasing thrust on household solar photo-voltaic (PV) panels. In view of the potential for interaction between dynamic pricing-driven and PV generation-driven load changes, an analysis of the combined effects in relation to the system profile is important, not least because this can affect the nature of benefits to households and to the grid. Using a unique and detailed dataset on household electricity consumption, in combination with simulated solar panel micro-generation data, these aspects are explored here using a demand framework drawn from the previous literature. Our findings indicate that even with low price responsiveness, household response to dynamic pricing can lead to load changes with sizeable benefits. In addition, the introduction of PV panels appear to be beneficial to the electric grid, largely due to the time pattern of winter PV generation. Overall, our findings provide tentative support to the hypothesis that dynamic pricing, by incentivizing households to provide demand response at appropriate times, can aid in integration of renewables.

  • 11.
    Vesterberg, Mattias
    et al.
    Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE).
    Krishnamurthy, Chandra Kiran B.
    Umeå University, Faculty of Social Sciences, Center for Environmental and Resource Economics (CERE). Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.
    Residential End-use Electricity Demand: Implications for Real Time Pricing in Sweden2016In: Energy Journal, ISSN 0195-6574, E-ISSN 1944-9089, Vol. 37, no 4, p. 141-164Article in journal (Refereed)
    Abstract [en]

    Using a unique and highly detailed data set on energy consumption at the appliance-level for 200 Swedish households, seemingly unrelated regression (SUR)based end-use specific load curves are estimated. The estimated load curves are then used to explore possible restrictions on load shifting (e.g. the office hours schedule) as well as the cost implications of different load shift patterns. The cost implications of shifting load from "expensive" to "cheap" hours, using the Nord pool spot prices as a proxy for a dynamic price, are computed to be very small; roughly 2-4% reduction in total daily cost from shifting load up to five hours ahead, indicating small incentives for households (and retailers) to adopt dynamic pricing of electricity.

    The full text will be freely available from 2019-10-31 11:34
1 - 11 of 11
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