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Real-time electricity pricing to balance green energy intermittency

Author

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  • Stefan Ambec

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Claude Crampes

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

The presence of consumers able to respond to changes in wholesale electricity prices facilitates the penetration of renewable intermittent sources of energy such as wind or sun power. We investigate how adapting demand to intermittent electricity supply by making consumers price-responsive - thanks to smart meters and home automation appliances - impacts the energy mix. We show that it almost always reduces carbon emissions. Furthermore, when consumers are not too risk-averse, demand response is socially beneficial because the loss from exposing consumers to volatile prices is more than offset by lower production and environmental costs. However, the gain is decreasing when the proportion of reactive consumers increases. Therefore, depending on the costs of the necessary smart hardware, it may be non-optimal to equip the whole population.

Suggested Citation

  • Stefan Ambec & Claude Crampes, 2021. "Real-time electricity pricing to balance green energy intermittency," Post-Print hal-03153425, HAL.
  • Handle: RePEc:hal:journl:hal-03153425
    DOI: 10.1016/j.eneco.2020.105074
    Note: View the original document on HAL open archive server: https://hal.science/hal-03153425
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    Cited by:

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    2. Pretto, Madeline, 2021. "Tail-risk Comprehension and Protection in Real-time Electricity Pricing : Experimental Evidence," Warwick-Monash Economics Student Papers 25, Warwick Monash Economics Student Papers.
    3. Nandeeta Neerunjun, 2022. "Emissions pricing instruments with intermittent renewables: second-best policy," Working Papers hal-03740013, HAL.
    4. Fabra, Natalia, 2021. "The energy transition: An industrial economics perspective," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    5. Alexander Haupt, 2023. "Environmental Policy and Renewable Energy in an Imperfectly Competitive Market," CESifo Working Paper Series 10524, CESifo.
    6. Nandeeta Neerunjun, 2022. "Emissions pricing instruments with intermittent renewables: second-best policy," AMSE Working Papers 2215, Aix-Marseille School of Economics, France.
    7. Jun Dong & Dongran Liu & Xihao Dou & Bo Li & Shiyao Lv & Yuzheng Jiang & Tongtao Ma, 2021. "Key Issues and Technical Applications in the Study of Power Markets as the System Adapts to the New Power System in China," Sustainability, MDPI, vol. 13(23), pages 1-29, December.
    8. Ferrasse, Jean-Henry & Neerunjun, Nandeeta & Stahn, Hubert, 2022. "Intermittency and electricity retailing: An incomplete market approach," Mathematical Social Sciences, Elsevier, vol. 120(C), pages 24-36.

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    More about this item

    Keywords

    Electricity; Intermittency; Renewables; Dynamic pricing; Demand response; Smart meters;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • 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
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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