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Estimating the Elasticity to Real-Time Pricing: Evidence from the Spanish Electricity Market

Author

Listed:
  • Natalia Fabra
  • David Rapson
  • Mar Reguant
  • Jingyuan Wang

Abstract

We estimate consumer response to the first large-scale real-time electricity pricing (RTP) program. In 2015, RTP became the default tariff for residential customers in Spain, exposing them to prices that vary hourly based on day-ahead wholesale prices. Using expected national wind production as an instrument for price, we estimate household-level demand elasticities for RTP households and non-RTP (placebo) households. Estimates show no difference in behavior across RTP and non-RTP households. Reasons for nonresponse may include low potential gains or high nonmonetary costs of information acquisition and behavioral change. We discuss implications for optimal dynamic electricity pricing.

Suggested Citation

  • Natalia Fabra & David Rapson & Mar Reguant & Jingyuan Wang, 2021. "Estimating the Elasticity to Real-Time Pricing: Evidence from the Spanish Electricity Market," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 425-429, May.
    • Handle: RePEc:aea:apandp:v:111:y:2021:p:425-29
    DOI: 10.1257/pandp.20211007
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    More about this item

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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