The Impact of Time-of-Use (TOU) Rate Structure on Consumption Patterns of the Residential Customers

Abstract

Load participation is vital for the smart grid development. As an effective tool to improve reliability, stability, and financial efficiency of the power grids, demand response (DR) has brought significant financial and technical benefits to power systems. As one of the price-based DR programs with less control costs, the time-of-use (TOU) program has been applied as the default rate structure by many utility companies. To avoid financial risks and make the most profit from the market, utility companies treat TOU as an effective strategy to change customers’ electricity consumption patterns. As reported in many literature, existing TOU programs are not as effective as expected in many developed countries due to the complexity of human behaviors and disparities of residential customers. To examine whether to obtain different outcomes of TOU on the residential customers in developing countries, actual utility usage data from residential consumers in Shanghai, China, are analyzed in this paper. The result shows current TOU in Shanghai, China, has similar trends as TOU in developed countries. With high penetration level of renewable energy, an effective TOU program is urgently needed in the utility industry. In recent years, a creative TOU pricing structure has been introduced at the Electrical Reliability Council of Texas deregulated market, and it shows that the introduced “zero pricing” strategy has a significant impact on customers’ consumption patterns. The purpose of this research is to examine the key reasons that underlie ineffectiveness/effectiveness of TOU programs at residential level.