IDEAS home Printed from https://ideas.repec.org/a/eee/jeeman/v128y2024ics0095069624001281.html

Do time-of-use prices deliver energy savings at the right time?

Author

Listed:
  • Fu, Zheng
  • Novan, Kevin
  • Smith, Aaron

Abstract

Time-of-use (TOU) electricity prices are increasingly being adopted to reduce consumption during the higher marginal cost afternoon hours. There is ample evidence that TOU rates reduce average consumption during the peak price hours of the day, but it is unknown how these energy savings are distributed across days. Using a unique dataset from households with smart thermostats, we find that adopting TOU rates causes large decreases in peak period AC usage, resulting in energy savings that are concentrated on the hottest, highest demand days when the benefits of conservation are the greatest.

Suggested Citation

  • Fu, Zheng & Novan, Kevin & Smith, Aaron, 2024. "Do time-of-use prices deliver energy savings at the right time?," Journal of Environmental Economics and Management, Elsevier, vol. 128(C).
    • Handle: RePEc:eee:jeeman:v:128:y:2024:i:c:s0095069624001281
    DOI: 10.1016/j.jeem.2024.103054
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0095069624001281
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeem.2024.103054?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. Faruqui, Ahmad & George, Stephen, 2005. "Quantifying Customer Response to Dynamic Pricing," The Electricity Journal, Elsevier, vol. 18(4), pages 53-63, May.
    2. Judson Boomhower & Lucas Davis, 2020. "Do Energy Efficiency Investments Deliver at the Right Time?," American Economic Journal: Applied Economics, American Economic Association, vol. 12(1), pages 115-139, January.
    3. Alberini, Anna & Filippini, Massimo, 2011. "Response of residential electricity demand to price: The effect of measurement error," Energy Economics, Elsevier, vol. 33(5), pages 889-895, September.
    4. Joshua Blonz & Karen Palmer & Casey J. Wichman & Derek C. Wietelman, 2025. "Smart Thermostats, Automation, and Time-Varying Prices," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 90-125, January.
    5. Miller, Mark & Alberini, Anna, 2016. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," Energy Policy, Elsevier, vol. 97(C), pages 235-249.
    6. Severin Borenstein & James B. Bushnell, 2022. "Do Two Electricity Pricing Wrongs Make a Right? Cost Recovery, Externalities, and Efficiency," American Economic Journal: Economic Policy, American Economic Association, vol. 14(4), pages 80-110, November.
    7. Lucas W Davis, 2017. "Evidence of a decline in electricity use by U.S. households," Economics Bulletin, AccessEcon, vol. 37(2), pages 1098-1105.
    8. James Bushnell & Kevin Novan, 2021. "Setting with the Sun: The Impacts of Renewable Energy on Conventional Generation," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 8(4), pages 759-796.
    9. Kevin Novan & Aaron Smith & Tianxia Zhou, 2022. "Residential Building Codes Do Save Energy: Evidence from Hourly Smart-Meter Data," The Review of Economics and Statistics, MIT Press, vol. 104(3), pages 483-500, May.
    10. Meredith Fowlie & Catherine Wolfram & Patrick Baylis & C Anna Spurlock & Annika Todd-Blick & Peter Cappers, 2021. "Default Effects And Follow-On Behaviour: Evidence From An Electricity Pricing Program," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(6), pages 2886-2934.
    11. 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.
    12. Katrina Jessoe & David Rapson, 2014. "Knowledge Is (Less) Power: Experimental Evidence from Residential Energy Use," American Economic Review, American Economic Association, vol. 104(4), pages 1417-1438, April.
    13. Matthew Harding & Steven Sexton, 2017. "Household Response to Time-Varying Electricity Prices," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 337-359, October.
    14. repec:aen:journl:2005v26-03-a05 is not listed on IDEAS
    15. Severin Borenstein, 2005. "The Long-Run Efficiency of Real-Time Electricity Pricing," The Energy Journal, , vol. 26(3), pages 93-116, July.
    16. Miller, Reid & Golab, Lukasz & Rosenberg, Catherine, 2017. "Modelling weather effects for impact analysis of residential time-of-use electricity pricing," Energy Policy, Elsevier, vol. 105(C), pages 534-546.
    17. 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.
    18. Goutam Dutta & Krishnendranath Mitra, 2017. "A literature review on dynamic pricing of electricity," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 68(10), pages 1131-1145, October.
    19. Ahmad Faruqui & Sanem Sergici, 2010. "Household response to dynamic pricing of electricity: a survey of 15 experiments," Journal of Regulatory Economics, Springer, vol. 38(2), pages 193-225, October.
    20. Jesse Burkhardt & Kenneth Gillingham & Praveen K. Kopalle, 2019. "Experimental Evidence on the Effect of Information and Pricing on Residential Electricity Consumption," NBER Working Papers 25576, National Bureau of Economic Research, Inc.
    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. Rigaux, Baptiste & Hamels, Sam & Ovaere, Marten, 2025. "The proof of the pudding is in the heating: A field experiment on household engagement with heat pump flexibility," Energy Economics, Elsevier, vol. 148(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. 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.
    2. Joshua Blonz & Karen Palmer & Casey J. Wichman & Derek C. Wietelman, 2025. "Smart Thermostats, Automation, and Time-Varying Prices," American Economic Journal: Applied Economics, American Economic Association, vol. 17(1), pages 90-125, January.
    3. 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.
    4. Kapeller, Rudolf & Cohen, Jed J. & Kollmann, Andrea & Reichl, Johannes, 2023. "Incentivizing residential electricity consumers to increase demand during periods of high local solar generation," Energy Economics, Elsevier, vol. 127(PA).
    5. Marten Ovaere & Mark Vergouwen, 2025. "Capacity Constraints and Electrification: Evidence from Residential Electricity Demand and Pricing," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 25/1115, Ghent University, Faculty of Economics and Business Administration, revised Jun 2026.
    6. Rigaux, Baptiste & Hamels, Sam & Ovaere, Marten, 2025. "The proof of the pudding is in the heating: A field experiment on household engagement with heat pump flexibility," Energy Economics, Elsevier, vol. 148(C).
    7. Ekaterina Alekhanova, 2023. "Summertime Sadness: Time Sensitivity of Electricity Savings from a Behavioral Nudge," Carleton Economic Papers 23-01, Carleton University, Department of Economics, revised 11 Nov 2023.
    8. Nakai, Miwa & von Loessl, Victor & Wetzel, Heike, 2024. "Preferences for dynamic electricity tariffs: A comparison of households in Germany and Japan," Ecological Economics, Elsevier, vol. 223(C).
    9. Garnache, Cloé & Hernaes, Øystein & Imenes, Anders Gravir, 2022. "Which Households Respond to Electricity Peak Pricing amid High Levels of Electrification?," IZA Discussion Papers 15194, IZA Network @ LISER.
    10. Freier, Julia & von Loessl, Victor, 2022. "Dynamic electricity tariffs: Designing reasonable pricing schemes for private households," Energy Economics, Elsevier, vol. 112(C).
    11. Andrea La Nauze & Flavio Menezes, 2024. "Challenges in the Consumer‐Side of the Energy Transition," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 57(4), pages 422-431, December.
    12. Gosnell, Greer & McCoy, Daire, 2023. "Market failures and willingness to accept smart meters: Experimental evidence from the UK," Journal of Environmental Economics and Management, Elsevier, vol. 118(C).
    13. Cabot, Clément & Villavicencio, Manuel, 2024. "Second-best electricity pricing in France: Effectiveness of existing rates in evolving power markets," Energy Economics, Elsevier, vol. 136(C).
    14. Fabra, Natalia, 2021. "The energy transition: An industrial economics perspective," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    15. Jacobsen, Grant D. & Stewart, James I., 2022. "How do consumers respond to price complexity? Experimental evidence from the power sector," Journal of Environmental Economics and Management, Elsevier, vol. 116(C).
    16. Jesse Burkhardt & Kenneth T. Gillingham & Praveen K. Kopalle, 2023. "Field Experimental Evidence on the Effect of Pricing on Residential Electricity Conservation," Management Science, INFORMS, vol. 69(12), pages 7784-7798, December.
    17. Guo, Bowei, 2023. "The spillover effect of peak pricing," Journal of Environmental Economics and Management, Elsevier, vol. 121(C).
    18. N. Bora Keskin & Yuexing Li & Nur Sunar, 2025. "Data-Driven Clustering and Feature-Based Retail Electricity Pricing with Smart Meters," Operations Research, INFORMS, vol. 73(5), pages 2636-2660, September.
    19. Javier Bueno & Desiderio Romero-Jordán & Pablo del Río, 2020. "Analysing the Drivers of Electricity Demand in Spain after the Economic Crisis," Energies, MDPI, vol. 13(20), pages 1-18, October.
    20. Adélaïde Fadhuile & Daniel Llerena & Béatrice Roussillon, 2023. "Intrinsic Motivation to Promote the Development of Renewable Energy : A Field Experiment from Household Demand," Working Papers hal-03977597, HAL.

    More about this item

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

    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:128:y:2024:i:c:s0095069624001281. 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.