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Retail pricing in Colombia to support the efficient deployment of distributed generation and electric stoves

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  • McRae, Shaun D.
  • Wolak, Frank A.

Abstract

Electricity tariff reform is an essential part of the clean energy transition. Existing tariffs encourage the over-adoption of residential solar systems and the under-adoption of electric alternatives to fossil fuels. However, an efficient tariff based on fixed charges and marginal cost pricing may harm low-income households. We propose an alternative methodology for setting fixed charges based on each household’s willingness to pay to consume electricity at marginal cost. Using household-level data from Colombia, we demonstrate the short-run and long-run distortions from the existing tariffs and how our new methodology could provide the economic, environmental, and health benefits from adopting clean energy technologies while still protecting low-income households from higher bills.

Suggested Citation

  • McRae, Shaun D. & Wolak, Frank A., 2021. "Retail pricing in Colombia to support the efficient deployment of distributed generation and electric stoves," Journal of Environmental Economics and Management, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:jeeman:v:110:y:2021:i:c:s0095069621001017
    DOI: 10.1016/j.jeem.2021.102541
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    1. David Rios & Alex Perez & Jaime Carabali & Luis Meneses, 2024. "Poder de mercado y eventos climáticos adversos en un mercado de electricidad hidro-dominado," Borradores de Economia 1266, Banco de la Republica de Colombia.

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