IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v35y2014i4p135-158.html

Is Mandating “Smart Meters†Smart?

Author

Listed:
  • Thomas-Olivier Leautier

Abstract

The advent of “smart meters†will make possible Real Time Pricing (RTP) of electricity: customers will face and react to wholesale spot prices, thus consumption of electric power will be aligned with its opportunity cost. This article determines the marginal value of a fraction of demand (or a consumer) switching to RTP, conditional on smart meters installation. First, it establishes sufficient conditions for the marginal value of RTP to be decreasing as the fraction of customers on RTP increases. Second, it derives this marginal value for a simple yet realistic specification of demand. Finally, using data from the French power market, it estimates that, for the vast majority of residential customers whose peak demand is lower than 6 kVA, the net surplus from switching to RTP is lower than 1 €/year for low demand elasticity, 4 €/year for high demand elasticity. This finding casts a doubt on the economic value of rolling out smart meters to all residential customers, for both policy makers and power suppliers.

Suggested Citation

  • Thomas-Olivier Leautier, 2014. "Is Mandating “Smart Meters†Smart?," The Energy Journal, , vol. 35(4), pages 135-158, October.
    • Handle: RePEc:sae:enejou:v:35:y:2014:i:4:p:135-158
    DOI: 10.5547/01956574.35.4.6
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.35.4.6
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.35.4.6?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
    ---><---

    References listed on IDEAS

    as
    1. repec:aen:journl:2006v27-04-a06 is not listed on IDEAS
    2. Severin Borenstein & Stephen Holland, 2005. "On the Efficiency of Competitive Electricity Markets with Time-Invariant Retail Prices," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 469-493, Autumn.
    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. Ambec, Stefan & Crampes, Claude, 2021. "Real-time electricity pricing to balance green energy intermittency," Energy Economics, Elsevier, vol. 94(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. Fang, Debin & Wang, Pengyu, 2023. "Optimal real-time pricing and electricity package by retail electric providers based on social learning," Energy Economics, Elsevier, vol. 117(C).
    2. Christian Gambardella & Michael Pahle & Wolf-Peter Schill, 2016. "Do Benefits from Dynamic Tariffing Rise? Welfare Effects of Real-Time Pricing under Carbon-Tax-Induced Variable Renewable Energy Supply," Discussion Papers of DIW Berlin 1621, DIW Berlin, German Institute for Economic Research.
    3. Carsten Helm & Mathias Mier, 2020. "Steering the Energy Transition in a World of Intermittent Electricity Supply: Optimal Subsidies and Taxes for Renewables Storage," ifo Working Paper Series 330, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    4. Marchetti, Isabella & Rego, Erik Eduardo, 2022. "The impact of hourly pricing for renewable generation projects in Brazil," Renewable Energy, Elsevier, vol. 189(C), pages 601-617.
    5. repec:aen:journl:ej37-4-vesterberg is not listed on IDEAS
    6. Christina Elberg, 2014. "Cross-Border Effects of Capacity Mechanisms in Electricity Markets," EWI Working Papers 2014-11, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    7. Helm, Carsten & Mier, Mathias, 2021. "Steering the energy transition in a world of intermittent electricity supply: Optimal subsidies and taxes for renewables and storage," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    8. Gambardella, Christian & Pahle, Michael, 2018. "Time-varying electricity pricing and consumer heterogeneity: Welfare and distributional effects with variable renewable supply," Energy Economics, Elsevier, vol. 76(C), pages 257-273.
    9. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    10. 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).
    11. Martin Dhaussy & Nandeeta Neerunjun & Hubert Stahn, 2025. "Optimal electricity consumption and storage under short-term renewable supply variability," AMSE Working Papers 2525, Aix-Marseille School of Economics, France.
    12. Anna Creti & Natalia Fabra, 2003. "Capacity Markets for Electricity," Industrial Organization 0309002, University Library of Munich, Germany, revised 26 Nov 2003.
    13. Miravete, Eugenio & Seim, Katja & Thurk, Jeff, 2013. "Complexity, Efficiency, and Fairness of Multi-Product Monopoly Pricing," CEPR Discussion Papers 9641, C.E.P.R. Discussion Papers.
    14. repec:aen:journl:ej37-si3-pahle is not listed on IDEAS
    15. Kim, Jeong-Yoo & Lee, Myeong Ho & Berg, Nathan, 2016. "Peak-load pricing in duopoly," Economic Modelling, Elsevier, vol. 57(C), pages 47-54.
    16. Arlt, Marie-Louise & Astier, Nicolas, 2023. "Do retail businesses have efficient incentives to invest in public charging stations for electric vehicles?," Energy Economics, Elsevier, vol. 124(C).
    17. Csereklyei, Zsuzsanna & Kallies, Anne, 2024. "A legal-economic framework of wholesale electricity markets: Assessing Australia's transition," Energy Policy, Elsevier, vol. 195(C).
    18. repec:aen:journl:ej37-3-simshauser is not listed on IDEAS
    19. Schlereth, Christian & Skiera, Bernd & Schulz, Fabian, 2018. "Why do consumers prefer static instead of dynamic pricing plans? An empirical study for a better understanding of the low preferences for time-variant pricing plans," European Journal of Operational Research, Elsevier, vol. 269(3), pages 1165-1179.
    20. Arlt, Marie-Louise & Chassin, David & Rivetta, Claudio & Sweeney, James, 2024. "Impact of real-time pricing and residential load automation on distribution systems," Energy Policy, Elsevier, vol. 184(C).
    21. Sai Bravo & Carole Haritchabalet, 2023. "Prosumers: Grid Storage vs Small Fuel-Cell," Working papers of Transitions Energétiques et Environnementales (TREE) hal-04119625, HAL.
    22. Severin Borenstein & James Bushnell, 2015. "The US Electricity Industry After 20 Years of Restructuring," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 437-463, August.
    23. Freier, Julia & von Loessl, Victor, 2022. "Dynamic electricity tariffs: Designing reasonable pricing schemes for private households," Energy Economics, Elsevier, vol. 112(C).

    More about this item

    Keywords

    ;
    ;
    ;

    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:sae:enejou:v:35:y:2014:i:4:p:135-158. 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: SAGE Publications (email available below). General contact details of provider: .

    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.