Response of large industrial customers to electricity pricing by voluntary time-of-use in Taiwan

The paper examines the response to a voluntary time-of-use (TOU) tariff structure by customers in five selected industrial categories in Taiwan. A transcendental logarithmic electricity cost function was selected in this paper to estimate the price elasticity in five selected industries by the econometric method. The model shows that the price elasticity is a function of electricity cost share. The analysis for the selected industries shows that electricity consumption by TOU was highly responsive to price changes. Electricity usages in different time periods were found to be substitutes for most of the industries. The comparison of load patterns of TOU rates with the hypothetical load patterns corresponding to equivalent uniform rate (EUR) structure indicates that the TOU customers decrease peak electricity use and increase off-peak electricity use significantly under TOU tariffs. The analysis of welfare changes between the TOU and EUR structures shows that large social benefits can be obtained from load management by indirect control of loads via a TOU rate structure. Generally, the magnitude of welfare gain closely depends on the customers´ response to TOU schedule. With a drastic reduction in peak period consumption, the social welfare will be significantly increased