Energy 44 (2012) 576e583

Contents lists available at SciVerse ScienceDirect

Energy
journal homepage: www.elsevier.com/locate/energy

Price-based demand side management: Assessing the impacts of time-of-use

tariffs on residential electricity demand and peak shifting in Northern Italy
Jacopo Torriti*
School of Construction Management and Engineering, University of Reading, UK

a r t i c l e i n f o

a b s t r a c t

Article history:
Received 20 January 2012
Received in revised form
18 May 2012
Accepted 27 May 2012
Available online 2 July 2012

One of the most common demand side management programs consists of time-of-use (TOU) tariffs,
where consumers are charged differently depending on the time of the day when they make use of
energy services. This paper assesses the impacts of TOU tariffs on a dataset of residential users from the
Province of Trento in Northern Italy in terms of changes in electricity demand, price savings, peak load
shifting and peak electricity demand at sub-station level. Findings highlight that TOU tariffs bring about
higher average electricity consumption and lower payments by consumers. A signicant level of load
shifting takes place for morning peaks. However, issues with evening peaks are not resolved. Finally, TOU
tariffs lead to increases in electricity demand for substations at peak time.
2012 Elsevier Ltd. All rights reserved.

Keywords:
Demand side management
Residential electricity demand
Smart meters
Time-of-Use

1. Introduction
The recent diffusion of smart metering devices for residential
consumers calls for research on how these can be integrated with
price-based demand side management (DSM) programs. Pricebased DSM programs, which are alternatives to at tariffs, include
critical peak pricing, extreme day pricing, real time pricing and
time-of-use (TOU) tariffs [1]. The latter provide consumers with
certainty about the price of consumption at different periods of the
day, unlike other price-based DSM programs where the price
uctuates following the real time cost of electricity [2,3]. This is
a signicant advantage, considering the risk-averse attitude to
uncertainty on prices of most residential electricity users [4,5].
Several studies investigated the relationship between TOU tariffs
and energy consumption [6e11]. Fewer studies have analyzed the
relationship between electricity demand and load shifting impacts
in connection with price-based DSM programs for residential users
[12,13].
This study assesses the electricity demand and load shifting
impacts related to TOU tariffs. The specicity of this approach
lies in the assessment of the impacts of TOU tariffs on electricity
demand, price savings, peak load shifting and changes in electricity demand at sub-station level. The assessment is based on
the comparison of time-related electricity consumption, prices
* Tel.: 44 (0)1183788196.
E-mail address: j.torriti@reading.ac.uk.
0360-5442/$ e see front matter 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.energy.2012.05.043

and peak loads before and after the introduction of TOU tariffs
from a dataset of residential consumers in the Province of Trento
in Northern Italy. The comparability of the TOU and non-TOU
(i.e. at tariffs) samples is ensured by taking into account only
data from the same seasons and controlling for weather
temperatures.
The paper describes the main features of the TOU database from
the Province of Trento (Section 2). It presents ndings on impacts of
TOU in terms of changes in electricity demand and price savings
(Section 3), as well as changes in peak load shedding and demand
for electricity substations (Section 4). It discusses ndings (Section
5). It concludes by explaining some of the main policy implications
of this research (Section 6).
2. Dataset on the Province of Trento
In Italy, TOU tariffs have gradually been applied to residential
electricity users since the year 2010. The rst pilot of TOU (tariffa
bioraria) involved 4 million end-users. Lower tariffs are applied to
weekends and to weekdays from 7.00 PM to 8.00 AM. The two
tariffs (0.09982 cent/kWh and 0.07078 cent/kWh for peak and offpeak respectively) are designed to yield savings for end-users
whose consumption is concentrated for more than 66% in correspondence with the lower tariff periods. The fact that electricity
bills represent 60% of bills for an average Italian consumer [14], the
high levels of active occupancy of residential users compared with
other European countries from Harmonised European Time Use

J. Torriti / Energy 44 (2012) 576e583

surveys [15], and the aging population make the Italian study
relevant to the literature on DSM.
Of the initial sample of 2000 households, 1446 residential users
granted the permission to request data about their electricity
consumption from electric utilities. The monitoring data regard the
period from 1st July 2009 to 30th June 2010 for at tariffs and from
1st July 2010 to 30th June 2011 for TOU tariffs. Meter readings were
taken for 15 min intervals. Downloads were made available both at
household and aggregate sub-station levels. The irregular spread
and conguration of the LV grid in the mostly mountainous sample
area means that geographical differences between substations
were not relevant to this analysis. The geographical distribution of
the dataset implies that 26% of the sample population lives in the
city of Trento, with the remaining 74% living in the province area, of
which 56% live in high mountain areas.

577

2.1. Meter readings

Prior to the trial period, all households had been provided with
smart meters with at tariffs adjusted by the energy regulator. As
a result, end-users could monitor their energy consumption for
a minimum of atleast 2 years before the trial period commenced.
The smart meters operate as communication systems transmitting
15 min consumption data to a data storage algorithm which automatically downloads consumption patterns to a data processing
software. TOU tariffs were explained to end-users in the three
electricity paper bills preceding the start date of the TOU tariffs, i.e.
1st July 2010.
Fig. 1 shows disaggregated time-related consumption data
under TOU tariffs in the month of July 2010 for 6 randomly selected
households from the data sample. Data were anonymized and

Fig. 1. Time-related consumption data under TOU tariffs in the months of July 2010 (at tariffs) and July 2011 (TOU tariffs).

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J. Torriti / Energy 44 (2012) 576e583

Table 1
Comparing temperatures between 00.00 and 3.00, 1st July 2009 and 1st July 2010 in
the city of Trento (Extract of XML weather dataset from Ufcio Idrograco della
Provincia Autonoma di Trento e Bolzano).
- <information city"Trento"
id"0464">
<day value"1.07.2009">
- <hour value "00:00">
<temp>14.83</temp>
<description>14</description>
<precipitation>1.12</precipitation>
<windir>301</windir>
<windvel>7.1</windvel>
<windchill>8</windchill>
<heatindex>14.83</heatindex>
- <hour value"01:00">
<temp>14.94</temp>
<description>8</description>
<precipitation>2.26</precipitation>
<windir>205</windir>
<windvel>6.4</windvel>
<windchill>8</windchill>
<heatindex>14.94</heatindex>
- <hour value"02:00">
<temp>14.96</temp>
<description>8</description>
<precipitation>2.07</precipitation>
<windir>209</windir>
<windvel>9.6</windvel>
<windchill>7</windchill>
<heatindex>14.96</heatindex>
- <hour value"03:00">
<temp>14.83</temp>
<description>8</description>
<precipitation>1.62</precipitation>
<windir>210</windir>
<windvel>9.1</windvel>
<windchill>7</windchill>
<heatindex>14.83</heatindex>

- <information city"Trento"
id"0464">
<day value"1.07.2010">
- <hour value"00:00">
<temp>13.71</temp>
<description>13</description>
<precipitation>2.31</precipitation>
<windir>224</windir>
<windvel>7.8</windvel>
<windchill>7</windchill>
<heatindex>13.71</heatindex>
- <hour value"01:00">
<temp>14.44</temp>
<description>8</description>
<precipitation>2.36</precipitation>
<windir>305</windir>
<windvel>8.8</windvel>
<windchill>7</windchill>
<heatindex>14.44</heatindex>
- <hour value"02:00">
<temp>14.81</temp>
<description>8</description>
<precipitation>2.32</precipitation>
<windir>297</windir>
<windvel>4.6</windvel>
<windchill>7</windchill>
<heatindex>14.81</heatindex>
- <hour value"03:00">
<temp>14.48</temp>
<description>8</description>
<precipitation>3.06</precipitation>
<windir>313</windir>
<windvel>9.1</windvel>
<windchill>7</windchill>
<heatindex>14.48</heatindex>

ndings are presented in terms of meter codes. The rst two letters
indicate the location of the end-user. A commonality across users is
the low use during the night which increases during early morning
periods and then drops at around 9.00 AM. A second peak takes
place in the late afternoon and early evening. This is consistent with
what common sense would suggest, i.e. that peaks in residential
electricity consumption take place in correspondence of main
household activities. However, any analysis focusing on comparison
of individual end-user data would be hindered by the great variance across end-users. For instance, with the bioraria tariff, user
BA0436 never reaches 0.6 kWh consumption for 15 min intervals,
whereas TN0781 exceeds this level 11 times in one month. Some
end-users, like TN0214, have a base-load in the region of 0.15 kWh.
For other users, e.g. ST0327, the base-load is much lower at around
0.02 kWh. This calls for an aggregate, time-related analysis of
consumption in relation to TOU pricing [16].
In order to examine seasonal variations in the data, aggregate
electricity consumption was divided between summer periods and
winter periods. From 1st October 2009 to 31st March 2010 under
at tariffs the average electricity consumption of the whole population during weekdays was 17.1 kWh per day, whereas from 1st
October 2010 to 31st March 2011 under TOU tariffs it was 18.4 kWh
per day. From 1st July to 30th September 2009 and from 1st April to
30th June 2010 under at tariffs the average electricity consumption of the whole population during weekdays was 19.8 kWh per
day while from 1st July to 30th September 2010 and from 1st April
to 30th June 2011 under TOU tariffs consumption was 23.1 kWh.
Hence, the seasonal differences are not too signicant. It is
acknowledged that considering seasonality issues in relation to
TOU and consumption is of extreme relevance to most analyses

[17e19]. However, for this study seasonality is less relevant than

weather variations which are captured in terms of hourly changes
in temperature between at tariffs and TOU households within the
same town. Seasonal variations might be affected by a whole set of
other variables, including weather [20,21], building characteristics
[22,23], lifestyle of occupants [24e26], habits of occupants [27e29],
appliance design [30e32], appliance control [33], interdependencies between energy services [34], etc. This study assumes that
appliance design and control systems did not change in the year
between the two measurements. It controls for weather temperature variations between 2010 and 2011 as explained in the next
paragraph. Observations on lifestyles and habits of occupants are
discussed in Section 5.
2.2. Temperature variations
In order to ensure that changes in weather conditions between
the TOU and non-TOU samples did not skew the dataset, temperatures were obtained for hourly periods from the Ufcio Idrograco
della Provincia Autonoma di Trento e Bolzano and measured in terms
of degree Celsius variations from average temperatures for each of
the Comuni in the dataset. When temperature variations between
the same hour intervals varied by more than 4 , the corresponding
electricity consumption was removed from the dataset, because
below this temperature, variations in electricity consumptions
should not be affected by temperatures in studies where the
penetration of electric heating is limited [35]. The XML data
exclusion function was applied for all entries exceeding 3.99  C.
Table 1 shows an XML sample of the temperature data for the
Comune of Trento from 00.00 to 3.00 on 1st July 2009 (at tariffs,
left column) and 1st July 2010 (TOU tariffs, right column). For
instance, at 1.00 AM on 1st July, the difference in temperatures
between the two years was 0.5  C (14.94  C in 2009 and 14.54  C in
2010). This means that XML did not exclude the 1.00 AM hour value.
Other weather variables, such as wind, precipitation, wind chill,
heat indexes, etc. are reported in Table 1, but are not attributed any
exclusionary property in this analysis.
Fig. 2 shows a map of the Trentino region with the sites of both
distribution and collector substations along with average temperature variations on the same dates from one year to the next. A
complete list of distribution and collector substations is presented
in Table 2 in Section 4. Temperature variations for the same dates
from one year to the next feature low mean average (1.47) and
standard deviation (0.39). Since 93.2% of overall temperature
variations were below the 4  C threshold, most of data on electricity
consumption was included in the dataset.
3. Impacts of TOU tariffs on electricity demand and price
savings
3.1. Electricity demand
Average daily variations in electricity demand associated with
consumers moving from at tariffs to TOU can be calculated as the
total sum of the area bounded between the TOU and at tariffs
demand curves. In principle, this could be determined as the
integral of the two functions. However, since representing mathematical functions for these two curves is beyond the scope of this
paper, the approach of linear interpolation is followed here for all
available values. Interpolation would not be possible for individual
users, given the extreme spikiness of consumption observed in the
examples in Fig. 1. However, interpolation is possible for highly
aggregated data. For each 15 min time interval points Qt and Qt1
and its related consumption points Ct and Ct1 it is possible
to estimate differences in energy consumption. If we dene f t,t1

J. Torriti / Energy 44 (2012) 576e583

579

Fig. 2. Map of Trentino indicating locations of substations and average temperature variations.

(Q t, Ct) the time-related consumption curve under at tariffs

b ;C
b t the time-related
between t, and t 1 and f t,t1 Q
t
consumption curve under TOU tariffs between t, and t 1, then

h


i h
i
bt  f
b
b
b
b ;C
b
ft;t1 Q
Q
* C
t
t;t1 Qt ; Ct
t1  Q t
t1  C t
 Qt1  Qt *Ct1  Ct :
(1)
b t > Ct then energy savings will be taking place at the time t.
If C
b t > Ct it means that at the time tTOU consumption is
Otherwise, if C
higher than with at tariffs. The total changes in electricity demand
between year one and year two will be measured as

X96 h
t1


i
b
b
C
t1  C t  Ct1  Ct lt

(2)

where lt is a dummy Boolean value for temperature variations so

that lt 1 for jlt1  lt2 jh4 and lt 0 for jlt1  lt2 j  4. In other
words, Equation (2) excludes those values the absolute variation in
temperatures between the two measurement years is more than
4  C.
Fig. 3 shows the average daily differences in electricity demand
with TOU and at tariffs. The darker gray shaded area represents
energy savings, whereas the lighter gray area represents negative
savings, or consumption increases associated with TOU. Overall
results show that the introduction of TOU tariffs brings about
negative energy savings. On average electricity consumption is
13.69% higher with TOU tariffs than with at tariffs.
3.2. Price savings
The average price difference paid by consumers is calculated as
difference between average payments under at tariffs and TOU
tariffs. Fig. 4 presents the payment curves for average time-related
demand of electricity. The gray shaded areas represent the periods
(from 7.00 PM to 8.00 AM) when higher prices were applied as part

of the bioraria tariff between 1st July 2010 and 30th June 2011,
whereas the central area in white represents the period between
8.00 AM and 7.00 PM when lower tariffs were applied. The most
signicant price savings occur due to lower consumption during
morning peak periods. The payments for TOU tariffs in year two are
higher for the evening load peak than for the morning one. On
average, consumers paid 5.31 Euros per day under TOU tariffs in the
second year of this study, whereas in the rst year they paid 5.43
Euros with at tariffs.
4. Impacts of TOU tariffs on load shedding and sub-station
demand
4.1. Load shedding
The morning peak, which in year one typically occurred
between 8.00 AM and 8.30 AM, is displaced under TOU by a new
morning peak taking place between 6.45 AM and 7.15 AM. Hence,
the introduction of differentiated tariffs triggers a signicant load
shed. What is more, both height and spikiness of the peak are
mitigated thanks to TOU tariffs. Although this study does not
feature qualitative data which might explain some of the causal
relations between timing and use of appliances in the household,
from an intuitive interpretation of the quantitative data it transpires that consumers seem impatient to make a start with their
days. This might be motivated by impelling activities such as taking
children to school which force consumers to start appliances even
after the end of the off-peak period. Another explanation is that
some consumers might be starting longer cycle appliances (e.g.
dishwashers and washing machines) far from the 8.00 AM
threshold with the intention of leaving them on when leaving the
household. Fig. 5 shows changes in peak events from at tariffs
(graph on the left) to TOU (graph on the right). One of the most
signicant ndings in terms of load peaks regards the evening peak
events. The evening peak event is still present under TOU, but

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J. Torriti / Energy 44 (2012) 576e583

Applying the transformation into polar, f (Qt, Ct) can be determined as

Table 2
Impacts of peak changes to substations.
Location of sub-station

Substation
capacity
(SC) (in KV)

(cosf sinf) 
r (cosf sinf)

(cosf sinf) 
r (cosf sinf)/SC

Ala
Avio
Borghetto sullAdige
Borgo Valsugana Centro
e Borgo Valsugana est
Calceranica
Caldonazzo
Grigno
Laives
Lana-Postal
Lavis
Levico Terme
Magr-Cortaccia
Mezzocorona
Monguelfo-Valle
di Casies
Mori
Ora
Pergine
Ponte dAdige
Ponte Gardena
Povo-Mesiano
Rio di Pusteria
Roncegno Bagni-Marter
Rovereto
S.Candido
S.Cristoforo al
Lago-Ischia
S.Lorenzo
Salorno
Serravalle allAdige
Settequerce
Strigno
Terlano-Andriano
Tezze di Grigno
Trento
Trento S.Bartolameo
Trento S.Chiara
Valdaora-Anterselva
Vandoies
Villabassa
Villazzano
Vilpiano-Nalles
Total

132
132
132
132

4.12
13.2
3.21
4.29

31.21
100.00
24.32
32.50

132
150
132
132
132
132
132
132
150
150

0.04
3.12
7.46
6.14
3.78
1.06
1.37
3.11
17.89
1.37

0.30
20.80
56.52
46.52
28.64
8.03
10.38
23.56
119.27
9.13

150
132
150
132
132
132
132
132
150
132
132

3.62
1.01
2.34
0.05
2.15
1.17
3.14
2.78
4.16
1.83
0.58

24.13
7.65
15.60
0.38
16.29
8.86
23.79
21.06
27.73
13.86
4.39

150
150
132
132
132
132
132
150
150
150
132
132
132
132
132

2.12
1.39
1.03
2.58
2.19
1.04
0.77
13.65
10.09
8.21
1.22
1.12
2.04
1.08
0.63

14.13
9.27
7.80
19.55
16.59
7.88
5.83
91.00
67.27
54.73
9.24
8.48
15.45
8.18
4.77
695.12

changes in shape, spikiness and height. A new higher peak appears

after 9.00 PM. Here the consumer seems to disregard the tariffs
system. This might be justied by practices in the household,
provided that in most Italian households the peak coincides with
dinner time and TV watching [15]. A third peak appears between
4.00 PM and 4.50 PM in correspondence with peak tariffs at a time
of the afternoon when with at tariffs consumption was rather low.
After that, between 5.00 PM and 7.00 PM the average electricity
load remains low. This may be interpreted as intentional avoidance
by end-users to make use of electricity in the 2 h preceding the
price switch to peak tariffs.
4.2. Consumption levels during peak events at the sub-station level
In order to assess the impacts of peak differences for the grid,
consumption levels are measured during peak events at the substation level. Peak shifts for the two typical peak events, i.e.
morning peak and evening peak are measured in connection with
sub-station time-related consumption.
For each 15 min interval points Q t and Q t1 and its related
consumption Ct and Ct1 it is possible to estimate polar coordinates
r and f so that f (Q t, Ct) can be expressed as f (r cosf, r sinf).

f r; f rcos f rsin f rcos f sin f:

(3)

Equation (1) can be transformed into





b sin f
b
b ;C
b f
r cos f
fT;T1 Q
T
T
T;T1 QT ; CT b
 rcos f sin f

(4)

which denes the net consumption during peak events, assuming

that the peaks can be represented within time intervals of 30 min.
The resulting peak values for the 41 substations are presented in
Table 2. Only 10 substations experience improvements in peaks
resulting from lower demand during peak events. For all other
substations, increases in peak demand implied an aggravation of
peak problems between year one and year two. The most notable
peak problems were identied in the substations of Mezzacorona,
Avio and Trento.
5. Discussion of ndings
Findings from 1,099,839,168 quarter hour readings downloaded
from 1446 smart meters over two distinct years show that
following the introduction of TOU tariffs (i) consumption increased
by 13.69%; (ii) consumers electricity bills decreased by 2.21%; (iii)
peak load shedding occurred for morning peaks and created a split
in two peaks for evening periods; and (iv) 75.6% of substations
experienced an increase in electricity demand during peak periods.
There are atleast four implications to the ndings of this study.
First, the relatively modest level of load shedding might be related
to the unchangeable nature of some of the activities associated with
the consumption of energy services. This reects the reality of
demand loads, which are predominantly determined by the timing
of human activities rather than prices [36e40]. Second, in cases
where load shedding occurred, it did not follow the prescriptions of
price. For example, a third peak emerged in the middle of the
afternoon and then led to lower consumption before the change in
tariffs at 7.00 PM. These results seem to indicate the unacceptability
of consuming electricity within peak periods when the off-peak
tariff is approaching, but need to be backed by qualitative
research from environmental psychology and sociology. Third, the
relative failure of TOU to relieve the system from peak loads calls
for a reection on the usefulness of such program with regards to
peak issues. Investing in programs which aim to be proxies for the
actual price of energy production (e.g. critical peak pricing, extreme
day pricing, real time pricing) might, in principle, be a more
effective way of getting residential consumers involved either in
active load shedding or in passive, i.e. highly automated forms of
load shedding. Fourth, the presence of a signicantly high peak
after 7.00 PM and the creation of a third peak between 4.00 PM and
4.50 PM means that in this case the introduction of TOU tariffs has
failed to address peak load problems for a time of the day when
typically more consumers make use of electricity than at other
parts of the day. The non-voluntarily nature of this price-based
DSM program and the asymmetries of information contingent to
the Italian tariffa bioraria might partly explain this situation.
The social scientists working on energy demand are divided
between those (mainly environmental psychologists) who believe
that energy demand is driven by individual choices which do not
follow rational behavior expectations on price and consumption
[36,37] and those (mainly environmental sociologists) who argue
that energy demand is driven by practices dictated by societal
needs and constraints [38e40]. The ndings of this paper seem to
agree with both approaches. On the one hand, the emergence of

J. Torriti / Energy 44 (2012) 576e583

Fig. 3. Differences in electricity demand from applying TOU tariffs.

Fig. 4. Average payments under at tariffs and TOU tariffs.

581

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J. Torriti / Energy 44 (2012) 576e583

Fig. 5. Peak areas (in kWh) for at and TOU tariffs.

a third peak in the afternoon and the lower level of electricity

consumption before the change in tariffs at 7.00 PM subvert
expectations on price and timing of consumption. On the other
hand, the overall limited level of load shifting when switching to
TOU tariffs, suggests that commitments with the societal sphere,
e.g. the work environment and childrens education, are unbending
determinants of energy consumption. This is in agreement with
practice theories which see energy demand as a subsidiary of
human practices [41,42]. These societal constraints which shape
occupancy data are even more signicant when taken at the
aggregate level [43]. That peoples routines feature practices which
are difcult to shift in time through price is demonstrated, for
instance, by the fact that high electricity consumption takes place
towards the end of the low tariff period in the morning.
The extent to which these ndings might be generalizable
depends on atleast three issues. First, the variations in weather
temperatures (Fig. 2 illustrates how these varied from averages).
This is partly explained by the geographical characteristics of the
data sample (very mountainous area). Second, the dataset is characterized by a fairly low degree of electric heating, with several old
buildings operating with wood logs and new buildings with
biomass [44]. This may motivates the low seasonal variation in the
data sample. Third, this study could not disaggregate the dual
impacts of energy monitoring and the price-based DSM program.
The break down would be helpful to inform the current debate on
the usefulness of In Home Displays for sole energy savings purposes
[45]. The degree to which smart meter monitoring affects the
results may relate to the fairly low price ratio (0.57) between TOU
peak price and at tariffs.
6. Conclusion
The non-voluntary participation to tariffa bioraria makes the
results of this study particularly signicant from a policy perspective as these provide evidence about the consequences of deploying
large scale TOU as default tariffs. At the same time, the format of
how the new tariff system was communicated to end-users
through previous paper bills may not be sufcient to prevent
problems with information. Other sources of information included
a program in the local TV news, advertisements on the radio,
newspaper articles and a mainly negative memo by one of the

consumers associations. Other studies investigated the importance

of full direct information in DSM programs, either through information campaigns [46] or through direct contact with the end-user,
e.g. via the smart meter installer [47]. As it was previously
mentioned, the latter option was not feasible in Italy where the
national roll-out of smart meters had taken place years earlier than
the TOU trials. A very drastic interpretation for the vast amount of
consumption taking place during the post 7.00 PM peak hours is
that the great number of consumers who operate appliances in the
evening time were not fully aware of the consequences of the
change in electricity rates.
Another relevant policy issue regards the price difference
between peak price and off-peak price. The Italian price ratio of
0.57 should be taken into account when generalizing the ndings of
this study and comparing them with TOU pricing experiences in
other countries. The role of the Italian energy regulatory agency in
setting prices was pivotal also in the rst two years of TOU practice.
When agreeing on the new TOU tariff, the regulator had to take into
account pressures from consumer groups.
TOU pricing is increasingly seen as a viable DSM option by
policy-makers, especially in countries where the implementation
of smart metering technologies has reached (or is going to reach in
the forthcoming years) double-digit penetration [48]. In terms of
functionalities of the smart metering device, TOU pricing does not
require complex two-way communication system. This simplies
issues of communication technologies applied to the smart meter
and data management for the supplier. This is not the case with
other price-based DSM solutions, such as real time pricing, which
require price signals from the supplier to the smart meter, and any
form of reward/penalty tariffs, which require analyses of responses
to peak signals in addition to the transmission of peak signals from
the supplier to the smart meter. The eventual development from
TOU based on pre-dened prices into a possible future smart
metering systems based on a two-way direct pricing has similarities with market-based approaches associated with small
Combined Heat and Power systems [49,50]. On the positive side,
the lesson from small Combined Heat and Power systems suggest
that two-way direct pricing approaches bring about better integration with the electricity supply. On the negative side, the
attractiveness of TOU pricing from a policy perspective is not
matched by economic rigor. A recent study points out that

J. Torriti / Energy 44 (2012) 576e583

electricity management at the building level needs to be coordinated with the higher level if it is to assist the overall system and
that other options at the system level might be more cost-effective
[51]. This study demonstrated an example of how overall
consumption tends to increase also causing further peaks.
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