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The design of wholesale electricity markets through deregulation has focused almost exclusively on the development of competitive supply (generation). The demand side of the market has been virtually ignored. Mostly, this is due to the assumption that electricity demand is almost completely inelastic. As a result, deregulated wholesale markets universally fail to pass price signals down to the end-users. This paper challenges the assumption of inelastic demand by exploring the potential benefits of implementing a simple load control scheme. This load control scheme allows consumers to shift demand from high priced hours to low priced hours during the day. The benefits to the individual consumer are explored through an example applied to residential air conditioning using price and demand data from California. This example shows that "smart" use of air conditioning can lead to great savings for residential consumers, without sacrificing comfort. The potential for multiple consumers implementing load control to reduce wholesale prices is also examined.
Ilić et al. (Wed,) studied this question.