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Real-Time Pricing and the Cost of Clean Power

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Solar and wind power are now cheaper than fossil fuels but are intermittent. The extra supply-side variability implies growing benefits of using real-time retail pricing (RTP). We evaluate the potential gains of RTP using a model that jointly solves investment, supply, storage, and demand to obtain a chronologically detailed dynamic equilibrium for the island of Oahu, Hawai'i. Across a wide range of cost and demand assumptions, we find the gains from RTP in high-renewable systems to exceed those in a conventional fossil system by roughly 6 times to 12 times, markedly lowering the cost of renewable energy integration.

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  • Imelda Imelda & Matthias Fripp & Michael J. Roberts, 2022. "Real-Time Pricing and the Cost of Clean Power," IHEID Working Papers 17-2022, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp17-2022
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    1. Koichiro Ito, 2014. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," American Economic Review, American Economic Association, vol. 104(2), pages 537-563, February.
    2. Daniel L. Sanchez & James H. Nelson & Josiah Johnston & Ana Mileva & Daniel M. Kammen, 2015. "Biomass enables the transition to a carbon-negative power system across western North America," Nature Climate Change, Nature, vol. 5(3), pages 230-234, March.
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    5. Severin Borenstein, 2005. "The Long-Run Efficiency of Real-Time Electricity Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 93-116.
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    More about this item

    Keywords

    Renewable energy; real-time pricing; storage; demand response; optimization;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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