Monte Carlo Analysis of Real-Time Electricity Pricing for Industrial Loads
- Carl J. Spezia (Southern Illinois University Carbondale)
Maintaining a competitive industrial business demands close cost control. Free market wholesale electricity sup- pliers offer a variety of purchase agreements. Suppliers now offer real-time pricing to all customer classes with the promise of potential savings. Real-time price tariffs mirror the dynamic nature of the wholesale electricity market. This market exhibits high price volatility due to constantly changing demand and lack of large-scale electricity storage technology. Businesses may benefit from these market changes depending on their load characteristics. This paper uses Monte Carlo analysis to determine the potential economic benefit of adopting a real-time price rate under different load parameters. Sections of this paper introduce load models for electric demand, define a benefit model, develop an expression for equivalent break-even fixed rates, examine parametric variation, and record simulation results. Simulations show that businesses with a high load factor have a greater probability of profiting from real-time price tariffs without adopting any load control strategy. Businesses with low load factors require higher equivalent break-even rates to benefit from real-time price tariffs.
How to Cite:
Spezia, C. J., (2009) “Monte Carlo Analysis of Real-Time Electricity Pricing for Industrial Loads”, The Journal of Technology, Management, and Applied Engineering 25(3).