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Utility Customer Supply of Demand Response Capacity

Abstract:
This research investigates utility customer supply of demand response capacity to electric utilities. Using panel data on annual utility demand response capacity and capacity payments between 2010 and 2016, I estimate the long-run price elasticity of supply of demand response capacity from residential, commercial, and industrial customers. The supply of demand response capacity was price-inelastic, with elasticities of 0.5 for residential customers, 0.6 for commercial customers, and 0.4 for industrial customers. These estimates are long-run supply elasticities because utility customers could enter or exit demand response markets. Also, residential customer supply of demand response capacity was heterogeneous, affected by characteristics such as customer education, urban residency, and home space heating fuel. These findings will be of interest to regulators, utility resource planners, and program administrators who want to increase demand response capacity.

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Keywords: Demand response, Utility customers, Supply elasticity, Panel regression

DOI: 10.5547/01956574.41.4.jste

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Published in Volume 41, Number 4 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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