IDEAS home Printed from https://ideas.repec.org/a/eee/jeeman/v121y2023ics0095069623000633.html
   My bibliography  Save this article

The spillover effect of peak pricing

Author

Listed:
  • Guo, Bowei

Abstract

Understanding consumer behaviours is important in designing dynamic tariffs, which are usually considered the first-best solution when the conventional flat tariff does not reflect the varying cost of electricity generation. I estimate households’ own- and cross-price elasticities using dataset from a smart metering project, and investigate which household specific characteristics determine the impact of peak prices on electricity consumption. I find peak prices (17:00–20:00) reduce peak and post-peak consumption (20:00–23:00), indicating a spillover effect of peak prices. The underlying mechanisms that could be generating the spillover effect have been further discussed and investigated. Finally, I estimate dynamic tariffs’ distributional and welfare effects, and demonstrate that the spillover effect is crucial in determining the cost effectiveness of a smart metering programme.

Suggested Citation

  • Guo, Bowei, 2023. "The spillover effect of peak pricing," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:jeeman:v:121:y:2023:i:c:s0095069623000633
    DOI: 10.1016/j.jeem.2023.102845
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0095069623000633
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeem.2023.102845?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Chi Kong Chyong, Bowei Guo, and David Newbery, 2020. "The Impact of a Carbon Tax on the CO2 Emissions Reduction of Wind," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    2. Valeria Di Cosmo & Sean Lyons & Anne Nolan, 2014. "Estimating the Impact of Time-of-Use Pricing on Irish Electricity Demand," The Energy Journal, , vol. 35(2), pages 117-136, April.
    3. Nojavan, Sayyad & Zare, Kazem & Mohammadi-Ivatloo, Behnam, 2017. "Optimal stochastic energy management of retailer based on selling price determination under smart grid environment in the presence of demand response program," Applied Energy, Elsevier, vol. 187(C), pages 449-464.
    4. Guo, Bowei & Weeks, Melvyn, 2022. "Dynamic tariffs, demand response, and regulation in retail electricity markets," Energy Economics, Elsevier, vol. 106(C).
    5. Gans, Will & Alberini, Anna & Longo, Alberto, 2013. "Smart meter devices and the effect of feedback on residential electricity consumption: Evidence from a natural experiment in Northern Ireland," Energy Economics, Elsevier, vol. 36(C), pages 729-743.
    6. Allcott, Hunt, 2011. "Rethinking real-time electricity pricing," Resource and Energy Economics, Elsevier, vol. 33(4), pages 820-842.
    7. Robin Greenwood & Andrei Shleifer, 2014. "Expectations of Returns and Expected Returns," The Review of Financial Studies, Society for Financial Studies, vol. 27(3), pages 714-746.
    8. Guo, Bowei & Castagneto Gissey, Giorgio, 2021. "Cost pass-through in the British wholesale electricity market," Energy Economics, Elsevier, vol. 102(C).
    9. Herter, Karen & Wayland, Seth, 2010. "Residential response to critical-peak pricing of electricity: California evidence," Energy, Elsevier, vol. 35(4), pages 1561-1567.
    10. Bryan K. Bollinger & Wesley R. Hartmann, 2020. "Information vs. Automation and Implications for Dynamic Pricing," Management Science, INFORMS, vol. 66(1), pages 290-314, January.
    11. Thomson, R. Camilla & Harrison, Gareth P. & Chick, John P., 2017. "Marginal greenhouse gas emissions displacement of wind power in Great Britain," Energy Policy, Elsevier, vol. 101(C), pages 201-210.
    12. Jessoe, Katrina & Rapson, David & Smith, Jeremy B., 2014. "Towards understanding the role of price in residential electricity choices: Evidence from a natural experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 191-208.
    13. Matthew Harding & Steven Sexton, 2017. "Household Response to Time-Varying Electricity Prices," Annual Review of Resource Economics, Annual Reviews, vol. 9(1), pages 337-359, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Antweiler, Werner & Muesgens, Felix, 2025. "The new merit order: The viability of energy-only electricity markets with only intermittent renewable energy sources and grid-scale storage," Energy Economics, Elsevier, vol. 145(C).
    2. Antweiler, Werner & Muesgens, Felix, 2024. "The new merit order: The viability of energy-only electricity markets with only intermittent renewable energy sources and grid-scale storage," Ruhr Economic Papers 1064, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Liang, Yinhe & Liu, Xi & Yu, Sitian, 2025. "Education and energy poverty: Evidence from China's compulsory education law," Energy, Elsevier, vol. 314(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:osf:thesis:7zprk_v1 is not listed on IDEAS
    2. Guo, Bowei & Weeks, Melvyn, 2022. "Dynamic tariffs, demand response, and regulation in retail electricity markets," Energy Economics, Elsevier, vol. 106(C).
    3. Cl'emence Alasseur & Ivar Ekeland & Romuald Elie & Nicol'as Hern'andez Santib'a~nez & Dylan Possamai, 2017. "An adverse selection approach to power pricing," Papers 1706.01934, arXiv.org, revised Sep 2019.
    4. Makena Coffman & Paul Bernstein & Derek Stenclik & Sherilyn Wee & Aida Arik, 2018. "Integrating Renewable Energy with Time Varying Pricing," Working Papers 2018-6, University of Hawaii Economic Research Organization, University of Hawaii at Manoa.
    5. Kim, Jihyo & Lee, Soomin & Jang, Heesun, 2022. "Lessons from residential electricity demand analysis on the time of use pricing experiment in South Korea," Energy Economics, Elsevier, vol. 113(C).
    6. Harding, Matthew & Kettler, Kyle & Lamarche, Carlos & Ma, Lala, 2023. "The (alleged) environmental and social benefits of dynamic pricing," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 574-593.
    7. Yan, Xing & Ozturk, Yusuf & Hu, Zechun & Song, Yonghua, 2018. "A review on price-driven residential demand response," Renewable and Sustainable Energy Reviews, Elsevier, vol. 96(C), pages 411-419.
    8. Marten Ovaere & Mark Vergouwen, 2025. "Mind the Peak: The Role of Peak Demand Charges and Real-Time Pricing in Residential Electricity Flexibility," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 25/1115, Ghent University, Faculty of Economics and Business Administration.
    9. Lang, Corey & Qiu, Yueming (Lucy) & Dong, Luran, 2023. "Increasing voluntary enrollment in time-of-use electricity rates: Findings from a survey experiment," Energy Policy, Elsevier, vol. 173(C).
    10. Mattias Vesterberg and Chandra Kiran B. Krishnamurthy, 2016. "Residential End-use Electricity Demand: Implications for Real Time Pricing in Sweden," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    11. Rebecca Afua Klege & Martine Visser & Saugato Datta & Matthew Darling, 2022. "The Power of Nudging: Using Feedback, Competition, and Responsibility Assignment to Save Electricity in a Non-residential Setting," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 81(3), pages 573-589, March.
    12. Kim, Kyungah & Choi, Jihye & Lee, Jihee & Lee, Jongsu & Kim, Junghun, 2023. "Public preferences and increasing acceptance of time-varying electricity pricing for demand side management in South Korea," Energy Economics, Elsevier, vol. 119(C).
    13. Hortay, Olivér & Kökény, László, 2020. "A villamosenergia-fogyasztás elhalasztásával kapcsolatos lakossági attitűd felmérése Magyarországon [A survey of popular attitudes to deferment of electricity consumption in Hungary]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 657-687.
    14. Clastres, Cédric & Khalfallah, Haikel, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Energy Economics, Elsevier, vol. 98(C).
    15. Valeria Di Cosmo & Sean Lyons & Anne Nolan, 2014. "Estimating the Impact of Time-of-Use Pricing on Irish Electricity Demand," The Energy Journal, , vol. 35(2), pages 117-136, April.
    16. Mattias Vesterberg & Chandra Kiran B. Krishnamurthy, 2016. "Residential End-use Electricity Demand: Implications for Real Time Pricing in Sweden," The Energy Journal, , vol. 37(4), pages 141-164, October.
    17. Cai, Qiran & Xu, Qingyang & Qing, Jing & Shi, Gang & Liang, Qiao-Mei, 2022. "Promoting wind and photovoltaics renewable energy integration through demand response: Dynamic pricing mechanism design and economic analysis for smart residential communities," Energy, Elsevier, vol. 261(PB).
    18. repec:rza:wpaper:763 is not listed on IDEAS
    19. Leslie A. Martin, 2022. "Driving on Sunbeams: Interactions Between Price Incentives for Electric Vehicles, Residential Solar Photovoltaics and Household Battery Systems," Economic Papers, The Economic Society of Australia, vol. 41(4), pages 369-384, December.
    20. Devine, Mel T. & Bertsch, Valentin, 2018. "Examining the benefits of load shedding strategies using a rolling-horizon stochastic mixed complementarity equilibrium model," European Journal of Operational Research, Elsevier, vol. 267(2), pages 643-658.
    21. Capitán, Tabaré & Alpízar, Francisco & Madrigal-Ballestero, Róger & Pattanayak, Subhrendu K., 2021. "Time-varying pricing may increase total electricity consumption: Evidence from Costa Rica," Resource and Energy Economics, Elsevier, vol. 66(C).
    22. Cédric Clastres & Haikel Khalfallah, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Post-Print hal-03193212, HAL.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:121:y:2023:i:c:s0095069623000633. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/622870 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.