Dynamic Modeling of Price Responsive Demand in Real-time Electricity Market: Empirical Analysis

Abstract

In this paper, we study the price responsiveness of electricity consumption from empirical commercial and industrial load data obtained from Texas. Employing a dynamical system perspective, we show that price responsive demand can be modeled as a hybrid of a Hammerstein model with delay following a price surge, and a linear ARX model under moderate price changes. It is observed that electricity consumption therefore has unique characteristics including (1) qualitatively distinct response between moderate and extremely high prices; and (2) a time delay associated with the response to high prices. It is shown that these observed features may render traditional approaches to demand response and retail pricing based on classical economic theories ineffective. In particular, ultimate real-time retail pricing may be limitedly beneficial than as considered in classical economic theories.