Evaluation of electricity rates through characterization and forecasting of energy consumption: A case study of an Italian industrial eligible customer

Abstract

Purpose

Liberalisation of the European electricity sector has allowed the industrial consumers to freely choose their electricity suppliers. Proliferation of different contract proposals for such supply means that all proposals need to be carefully evaluated for correct supplier renewal choice. The purpose of this paper is to propose a methodology for the evaluation of heterogeneous proposals of electricity supply that would help industrial consumers to be ready to face supply contractors.

Design/methodology/approach

The method relies on a three‐stage analysis: characterisation of electricity consumption in the industrial process; demand forecasts based on energy drivers and consumption characterisation; and finally a detailed tariff analysis. The method is illustrated through a case study of a renewal contract of an Italian industrial plant with a 20 percent incidence of electrical energy cost on the final product. The investigation also includes a sensitivity analysis on combustible basket price and the distribution of daily working load.

Findings

The evaluation of 14 proposals for the case study was carried out and the best offer for the case study company was selected. However, the overall price variation is 4 percent among different proposals and the electrical energy price shows an increase of 12 percent compared with the previous year. This suggests limited effectiveness of the competitive market in the Italian context.

Practical implications

The method can be considered as a practical guide for the electrical energy contract renewal process of any industrial consumer that would help minimize its cost.

Originality/value

The proposed method is based on an innovative investigation of the consumption characterisation of the industry based on energy drivers. This approach allows the industries to develop their own strategies for the contract renewal. The analysis presented here could be expanded to include more specific supply clauses for a more comprehensive analysis.

Citation

Di Silvio, B., Cesarotti, V. and Introna, V. (2007), "Evaluation of electricity rates through characterization and forecasting of energy consumption: A case study of an Italian industrial eligible customer", International Journal of Energy Sector Management, Vol. 1 No. 4, pp. 390-412. https://doi.org/10.1108/17506220710836093