The Long-Run Efficiency of Real-Time Electricity Pricing
AbstractRetail real-time pricing (RTP) of electricity Ð retail pricing that changes hourly to reflect the changing supply/demand balance Ð is very appealing to economists because it Òsends the right price signals.Ó Economic efficiency gains from RTP, however, are often confused with the short-term wealth transfers from producers to consumers that RTP can create. Abstracting from transfers, I focus on the long-run efficiency gains from adopting RTP in a competitive electricity market. Using simple simulations with realistic parameters, I demonstrate that the magnitude of efficiency gains from RTP is likely to be significant even if demand shows very little elasticity. I also show that Òtime-of-useÓ pricing, a simple peak and off-peak pricing system, is likely to capture a very small share of the efficiency gains that RTP offers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by International Association for Energy Economics in its journal The Energy Journal.
Volume (Year): Volume 26 (2005)
Issue (Month): Number 3 ()
Find related papers by JEL classification:
- F0 - International Economics - - General
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Allcott, Hunt, 2011. "Rethinking real-time electricity pricing," Resource and Energy Economics, Elsevier, vol. 33(4), pages 820-842.
- Adela Conchado & Pedro Linares, 2010. "The Economic Impact of Demand-Response Programs on Power Systems. A survey of the State of the Art," Working Papers 02-2010, Economics for Energy.
- Claire Bergaentzlé & Cédric Clastres & Haikel Khalfallah, 2014. "Demand-side management and European environmental and energy goals: an optimal complementary approach," Post-Print halshs-00928678, HAL.
- Wai Choi & Anindya Sen & Adam White, 2011. "Response of industrial customers to hourly pricing in Ontario’s deregulated electricity market," Journal of Regulatory Economics, Springer, vol. 40(3), pages 303-323, December.
- Kopsakangas Savolainen, Maria & Svento, Rauli, 2012. "Real-Time Pricing in the Nordic Power markets," Energy Economics, Elsevier, vol. 34(4), pages 1131-1142.
- Friedman, Lee S., 2011. "The importance of marginal cost electricity pricing to the success of greenhouse gas reduction programs," Energy Policy, Elsevier, vol. 39(11), pages 7347-7360.
- Claire Bergaentzlé & Cédric Clastres, 2013. "Tarifications dynamiques et efficacité énergétique : l'apport des Smart Grids," Post-Print halshs-00822731, HAL.
- Boom, Anette & Schwenen, Sebastian, 2013.
"Real-time Pricing in Power Markets: Who Gains?,"
01-2013, Copenhagen Business School, Department of Economics.
- Boom, Anette & Schwenen, Sebastian, 2012. "Real-time Pricing in Power Markets: Who Gains?," Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 66062, Verein für Socialpolitik / German Economic Association.
- Rodrigues, Renato & Linares, Pedro & Gómez-Plana, Antonio G., 2011. "A CGE Assessment of the Impacts on Electricity Production and CO2 Emissions of a Residential Demand Response Program in Spain/Impacto sobre la producción eléctrica y emisiones de CO2 de un programa ," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 29, pages 665 (36 pag, Agosto.
- Herter, Karen, 2007. "Residential implementation of critical-peak pricing of electricity," Energy Policy, Elsevier, vol. 35(4), pages 2121-2130, April.
- De Jonghe, C. & Hobbs, B. F. & Belmans, R., 2011. "Integrating short-term demand response into long-term investment planning," Cambridge Working Papers in Economics 1132, Faculty of Economics, University of Cambridge.
- Bushnell, James, 2010.
"Building Blocks: Investment in Renewable and Non-Renewable Technologies,"
Staff General Research Papers
31546, Iowa State University, Department of Economics.
- James Bushnell, 2011. "Building Blocks: Investment in Renewable and Nonrenewable Technologies," RSCAS Working Papers 2011/53, European University Institute.
- C. Woo & J. Zarnikau & E. Kollman, 2012. "Exact welfare measurement for double-log demand with partial adjustment," Empirical Economics, Springer, vol. 42(1), pages 171-180, February.
- Léautier, Thomas-Olivier, 2012.
"Is mandating "smart meters" smart?,"
TSE Working Papers
12-341, Toulouse School of Economics (TSE).
- Richard Green, 2010. "Energy Regulation in a Low Carbon World," Discussion Papers 10-16, Department of Economics, University of Birmingham.
- Walawalkar, Rahul & Blumsack, Seth & Apt, Jay & Fernands, Stephen, 2008. "An economic welfare analysis of demand response in the PJM electricity market," Energy Policy, Elsevier, vol. 36(10), pages 3692-3702, October.
- Paul L. Joskow, 2012. "Creating a Smarter U.S. Electricity Grid," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 29-48, Winter.
- Grohnheit, Poul Erik & Andersen, Frits Møller & Larsen, Helge V., 2011. "Area price and demand response in a market with 25% wind power," Energy Policy, Elsevier, vol. 39(12), pages 8051-8061.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Williams).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.