Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance
AbstractReal-time pricing (RTP) of electricity would improve allocative efficiency and limit wholesalers' market power. Conventional wisdom claims that RTP provides additional environmental benefits. This paper argues that RTP will reduce the variance, both within- and across-days, in the quantity of electricity demanded. We estimate the short-run impacts of this reduction on SO_2, NO_x, and CO_2 emissions. Reducing variance decreases emissions in regions where peak demand is met more by oil-fired capacity than by hydropower, such as the Mid-Atlantic. However, reducing variance increases emissions in more U.S. regions, namely those with more hydropower like the West. The effects are relatively small. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal The Review of Economics and Statistics.
Volume (Year): 90 (2008)
Issue (Month): 3 (August)
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Other versions of this item:
- Stephen P. Holland & Erin T. Mansur, 2007. "Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance," NBER Working Papers 13508, National Bureau of Economic Research, Inc.
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
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