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Cost-reflective electricity pricing: Consumer preferences and perceptions

Author

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  • Hall, Nina L.
  • Jeanneret, Talia D.
  • Rai, Alan

Abstract

In Australia, residential electricity peak demand has risen steeply in recent decades, leading to higher prices as new infrastructure was needed to satisfy demand. One way of limiting further infrastructure-induced retail price rises is via ‘cost-reflective’ electricity network pricing that incentivises users to shift their demand to non-peak periods. Empowering consumers with knowledge of their energy usage is critical to maximise the potential benefits of cost-reflective pricing. This research consulted residential electricity consumers in three Australian states on their perceptions and acceptance of two cost-reflective pricing scenarios (Time-of-Use and Peak Capacity pricing) and associated technologies to support such pricing (smart meters, in-home displays and direct load control devices). An energy economist presented information to focus groups on the merits and limitations of each scenario, and participants’ views were captured. Almost half of the 53 participants were agreeable to Time-of-Use pricing, but did not have a clear preference for Peak Capacity pricing, where the price was based on the daily maximum demand. Participants recommended further information to both understand and justify the potential benefits, and for technologies to be introduced to enhance the pricing options. The results have implications for utilities and providers who seek to reduce peak demand.

Suggested Citation

  • Hall, Nina L. & Jeanneret, Talia D. & Rai, Alan, 2016. "Cost-reflective electricity pricing: Consumer preferences and perceptions," Energy Policy, Elsevier, vol. 95(C), pages 62-72.
  • Handle: RePEc:eee:enepol:v:95:y:2016:i:c:p:62-72
    DOI: 10.1016/j.enpol.2016.04.042
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christine Milchram & Geerten Van de Kaa & Neelke Doorn & Rolf Künneke, 2018. "Moral Values as Factors for Social Acceptance of Smart Grid Technologies," Sustainability, MDPI, Open Access Journal, vol. 10(8), pages 1-23, August.
    2. Milchram, Christine & Hillerbrand, Rafaela & van de Kaa, Geerten & Doorn, Neelke & Künneke, Rolf, 2018. "Energy Justice and Smart Grid Systems: Evidence from the Netherlands and the United Kingdom," Applied Energy, Elsevier, vol. 229(C), pages 1244-1259.
    3. Tayal, Dev & Evers, Uwana, 2018. "Consumer preferences and electricity pricing reform in Western Australia," Utilities Policy, Elsevier, vol. 54(C), pages 115-124.
    4. Layer, Patrick & Feurer, Sven & Jochem, Patrick, 2017. "Perceived price complexity of dynamic energy tariffs: An investigation of antecedents and consequences," Energy Policy, Elsevier, vol. 106(C), pages 244-254.
    5. Passey, Robert & Haghdadi, Navid & Bruce, Anna & MacGill, Iain, 2017. "Designing more cost reflective electricity network tariffs with demand charges," Energy Policy, Elsevier, vol. 109(C), pages 642-649.
    6. Langbroek, Joram H.M. & Franklin, Joel P. & Susilo, Yusak O., 2017. "When do you charge your electric vehicle? A stated adaptation approach," Energy Policy, Elsevier, vol. 108(C), pages 565-573.
    7. Michael Maphosa, 2018. "The ‘User Pays’ Principle and the Electricity Sector: A South African Case," Journal of Economics and Behavioral Studies, AMH International, vol. 10(5), pages 51-58.
    8. Bastida, Leire & Cohen, Jed J. & Kollmann, Andrea & Moya, Ana & Reichl, Johannes, 2019. "Exploring the role of ICT on household behavioural energy efficiency to mitigate global warming," Renewable and Sustainable Energy Reviews, Elsevier, vol. 103(C), pages 455-462.

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