Dynamic electricity pricing – modeling manufacturer response and an application to cement processing

In this article published in Energy and Environment Research, Derya Eryilmaz and co-authors discuss the economic implications of real-time pricing mechanisms in a cement manufacturing plant. This paper studies the economic implications of real-time pricing mechanisms in a cement manufacturing plant. Production for a representative cement manufacturing plant is modeled using stochastic mathematical programming. The results show that a cement plant can a) reduce electricity costs by shifting electricity load of certain processes to times when electricity prices are lower, and b) profitably reduce electricity use during peak prices through more efficient scheduling of production under real-time pricing compared to fixed pricing. The results suggest that building scheduling flexibility into certain industrial manufacturing processes to reschedule electricity consumption when the electricity prices at their peak may be economical. The results also suggest that shifts in the production schedule of a cement manufacturer that result from real-time pricing may also influence environmental impacts. The modelling framework modeled real-time pricing as a source of risk in this study, which is also applicable to other energy intensive industries.