Providing Utility to Utilities : the Value of Information Systems Enabled Flexibility in Electricity Consumption

Title data

Fridgen, Gilbert ; Häfner, Lukas ; König, Christian ; Sachs, Thomas:
Providing Utility to Utilities : the Value of Information Systems Enabled Flexibility in Electricity Consumption.
In: Journal of the Association for Information Systems. Vol. 17 (2016) Issue 8 . - pp. 537-563.
ISSN 1536-9323

Project information

Abstract in another language

As the transition to renewable energy sources progresses, integration of such sources makes electricity production fluctuate increasingly. To contribute to power grid stability, electric utilities must balance volatile supply through shifting demand. This measure of demand response depends on flexibility, which is enabled as the integration of information systems in the power grid grows. The option to shift electric loads to times of lower demand or higher supply bears an economic value. Following a design science research approach, we illustrate how to quantify this value in order to support decisions on short-term consumer compensation. We adapt real options theory to the design – a strategy which has been widely used in information systems research for valuation under uncertainty. As a prerequisite, we develop a stochastic process, which realistically replicates intraday electricity spot price development. It enables us to design an artifact suitable for valuation, which we illustrate in a plug-in electric vehicle scenario. Following the artifact’s evaluation based on historical spot price data from the electricity exchange EPEX SPOT, we find that real options analysis is well suited for quantifying the value of information systems enabled flexibility in electricity consumption.