Residential demand response and dynamic electricity contracts with hourly prices: A study of Norwegian households during the 2021/22 energy crisis

Price-responsive demand and dynamic electricity price contracts can play a vital role in balancing renewable energy production and alleviating energy shortages such as those experienced in the European energy crisis. This study focuses on the implicit demand flexibility of residential consumers during extraordinarily high electricity prices in winter 2021/22 in Norway where most households have electric heating and spot price contracts. An econometric model is developed that compares the demand with pre-crisis levels, adjusts for factors influencing electricity consumption, such as outdoor temperature, and utilises a comprehensive dataset including hourly electricity demand data. The results reveal a quick response since the price signal was passed immediately to the customers and substantial energy savings of 11.4 % during winter. While the average household showed no significant short-term price response to daily or hourly price variations, several subgroups did. Particularly, households actively monitoring hourly prices via real-time information channels and those with automatic smart charging of electric cars showed higher load reductions in peak price hours and load shifting to low-price hours. Thus, the study concludes that households are able to respond to variable hourly electricity prices and suggests the promotion of spot price contracts to incentivise residential demand response.