Abstract
While several studies have estimated the industrial demand for electricity, this paper explicitly estimates the relationship between the industrial self-generation of electricity and electricity prices, an area of analysis which to our knowledge has not been explicitly modelled. The result is a possibly sharper analysis of the industrial demand for electricity, given the choice to self-generate, and perhaps more accurate forecasts of energy demand. Further, this study recognizes the regional differences that characterize energy systems, including utility electric systems. We use this regional model to forecast industrial generation of electricity in 1985 under the Department of Energy Reference Scenario and under an electricity rate reform scenario which would implement marginal cost prices for electricity.
Highlights
Industrial demand for electricity is a large fraction of the total demand facing electric utilities, accounting for 37 percent of all electricity con sumption in 1975 [S], This industrial demand is extremely important for utilities since it is a large and continuous demand and can be satisfied with electricity produced by baseload plants
We have derived a regression equation based on recent time series and cross section data which tests the hypothesis that industrial generation is responsive to electricity prices and the industrial output mix
We found that the ratio of generation to purchased electricity, the level of generation, is sensitive to price but it varies widely across regions and has been declining over time. With this regression model we forecast the ratio of generation to purchased electricity by state for 1985 using the PIES reference forecast of electricity prices
Summary
Industrial demand for electricity is a large fraction of the total demand facing electric utilities, accounting for 37 percent of all electricity con sumption in 1975 [S], This industrial demand is extremely important for utilities since it is a large and continuous demand and can be satisfied with electricity produced by baseload plants. Because of the high capital intensity of baseload electric plants, accurate forecasts of the level of industrial demand are necessary for efficient investment planning. For public policy analysis, forecasts of the level of industrial demand are necessary to predict the mix of baseload, cycling and peakload plants required to meet a given electricity demand, especially since there has been much interest recently in electricity rate reform [l]. The result is a possibly sharper analysis ofthe industrial demand for electricity, given the choice to self-generate, and perhaps more accurate forecasts of energy demand. This study recognizes the regional differences that characterize energy systems,including utility electric systems We use this regional model to forecast industrial generation of electricity in 1985 under the Department of Energy Reference Scenario and under an elec tricity rate reform scenario which would implement marginal cost prices for electricity
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