Rethinking Real Time Electricity Pricing
AbstractMost US consumers are charged a near-constant retail price for electricity, despite substantial hourly variation in the wholesale market price. This paper evaluates the .rst program to expose residential consumers to hourly real time pricing (RTP). I .nd that enrolled households are statistically signi.cantly price elastic and that consumers responded by conserving energy during peak hours, but remarkably did not increase average consumption during o¤-peak times. Welfare analysis suggests that program households were not su¢ ciently price elastic to generate efficiency gains that substantially outweigh the estimated costs of the advanced electricity meters required to observe hourly consumption. Although in electricity pricing, congestion pricing, and many other settings, economists.intuition is that prices should be aligned with marginal costs, residential RTP may provide an important real-world example of a situation where this is not currently welfare-enhancing given contracting or information costs.
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Bibliographic InfoPaper provided by Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research in its series Working Papers with number 0915.
Date of creation: Oct 2009
Date of revision:
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-ENE-2010-01-10 (Energy Economics)
- NEP-IND-2010-01-10 (Industrial Organization)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Introduce real time electricity pricing?
by Economic Logician in Economic Logic on 2010-01-29 15:15:00
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