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Consumers’ Willingness to Accept Time-of-Use Tariffs for Shifting Electricity Demand

Author

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  • Swantje Sundt

    (Department of Economics, Kiel University, Olshausenstraße 40, D-24098 Kiel, Germany)

  • Katrin Rehdanz

    (Department of Economics, Kiel University, Olshausenstraße 40, D-24098 Kiel, Germany)

  • Jürgen Meyerhoff

    (Center of Landscape Economics, Institute of Landscape Architecture and Environmental Planning, Technische Universität Berlin, Straße des 17. Juni 135, 10623 Berlin, Germany)

Abstract

Time-of-use (TOU) electricity tariffs represent an instrument for demand side management. By reducing energy demand during peak times, less investments in otherwise necessary, costly, and CO 2 intensive redispatch would be required. We use a choice experiment (CE) to analyze private consumers’ acceptance of TOU tariffs in Germany. In our CE, respondents choose between a fixed rate tariff and two TOU tariffs that differ by peak time scheme and by a control of appliances’ electricity consumption during that time. We use a mixed logit model to account for taste heterogeneity. Moreover, investigating decision strategies, we identify three different strategies that shed light on drivers of unobserved taste heterogeneity: (1) Always choosing the status quo, (2) always choosing the maximum discount, and (3) choosing a TOU tariff but not always going for the maximum discount. Overall, about 70% of our 1398 respondents would choose a TOU tariff and shift their electricity demand, leading to a decline in energy demand during peak times. Rough estimates indicate that this would lead to significant savings in electricity generation, avoiding up to a mid to large-sized fossil-fuel power plant.

Suggested Citation

  • Swantje Sundt & Katrin Rehdanz & Jürgen Meyerhoff, 2020. "Consumers’ Willingness to Accept Time-of-Use Tariffs for Shifting Electricity Demand," Energies, MDPI, vol. 13(8), pages 1-17, April.
    • Handle: RePEc:gam:jeners:v:13:y:2020:i:8:p:1895-:d:344925
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    References listed on IDEAS

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    3. Broberg, Thomas & Daniel, Aemiro Melkamu & Persson, Lars, 2021. "Household preferences for load restrictions: Is there an effect of pro-environmental framing?," Energy Economics, Elsevier, vol. 97(C).
    4. Yuriy Leonidovich Zhukovskiy & Margarita Sergeevna Kovalchuk & Daria Evgenievna Batueva & Nikita Dmitrievich Senchilo, 2021. "Development of an Algorithm for Regulating the Load Schedule of Educational Institutions Based on the Forecast of Electric Consumption within the Framework of Application of the Demand Response," Sustainability, MDPI, vol. 13(24), pages 1-26, December.
    5. Lucas Roth & Jens Lowitzsch & Özgür Yildiz, 2021. "An Empirical Study of How Household Energy Consumption Is Affected by Co-Owning Different Technological Means to Produce Renewable Energy and the Production Purpose," Energies, MDPI, vol. 14(13), pages 1-38, July.
    6. von Loessl, Victor, 2023. "Smart meter-related data privacy concerns and dynamic electricity tariffs: Evidence from a stated choice experiment," Energy Policy, Elsevier, vol. 180(C).
    7. Lehmann, Nico & Sloot, Daniel & Ardone, Armin & Fichtner, Wolf, 2022. "Consumer preferences for the design of a demand response quota scheme – Results of a choice experiment in Germany," Energy Policy, Elsevier, vol. 167(C).
    8. Leandra Scharnhorst & Thorben Sandmeier & Armin Ardone & Wolf Fichtner, 2021. "The Impact of Economic and Non-Economic Incentives to Induce Residential Demand Response—Findings from a Living Lab Experiment," Energies, MDPI, vol. 14(8), pages 1-24, April.
    9. Minseok Jang & Hyun-Cheol Jeong & Taegon Kim & Sung-Kwan Joo, 2021. "Load Profile-Based Residential Customer Segmentation for Analyzing Customer Preferred Time-of-Use (TOU) Tariffs," Energies, MDPI, vol. 14(19), pages 1-12, September.
    10. Swantje Sundt, 2021. "Influence of Attitudes on Willingness to Choose Time-of-Use Electricity Tariffs in Germany. Evidence from Factor Analysis," Energies, MDPI, vol. 14(17), pages 1-20, August.
    11. Cheng-Ta Tsai & Yu-Shan Cheng & Kuen-Huei Lin & Chun-Lung Chen, 2021. "Effects of a Battery Energy Storage System on the Operating Schedule of a Renewable Energy-Based Time-of-Use Rate Industrial User under the Demand Bidding Mechanism of Taipower," Sustainability, MDPI, vol. 13(6), pages 1-15, March.
    12. Satoshi Nakano & Ayu Washizu, 2020. "On the Acceptability of Electricity Demand Side Management by Time of Day," Energies, MDPI, vol. 13(14), pages 1-21, July.

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