Abstract
One of the primary reasons that the electricity market failed in California during the 2000–2001 period was the lack of dynamic demand response to rising wholesale electricity prices. Had retail customers seen rising prices also, they would have cut back on usage, thereby diminishing the ability of sellers to charge high prices. Having experienced power blackouts in the winter of 2000–2001, Californians cut back on usage during the summer of 2001. Another driver for usage reduction was a variety of demand response programs that were funded to the tune of $1 billion through emergency legislation. Consequently, no blackouts took place, and there was only one Stage III event1, on July 3. Demand dropped by 7,000 MW. Without that reduction in demand, analysts at California’s Independent System Operator (ISO) and at the North American Electricity Reliability Council (NERC) had been expecting the state to experience several hundred hours of blackouts, costing the state economy hundreds of millions of dollars in lost output.
The numerical estimates presented in this paper are illustrative in nature, and should not be regarded as definitive.
Signifying that reserves had dropped below 1.5%.
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Faruqui, A., Wikler, G., Bran, I. (2002). The Long View of Demand-Side Management Programs. In: Crew, M.A., Schuh, J.C. (eds) Markets, Pricing, and Deregulation of Utilities. Topics in Regulatory Economics and Policy Series, vol 40. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0877-9_3
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DOI: https://doi.org/10.1007/978-1-4615-0877-9_3
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