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Estimating the impact of time-of-use pricing on Irish electricity demand

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  • Di Cosmo, Valeria
  • Lyons, Sean
  • Nolan, Anne

Abstract

Electricity demand traditionally exhibits a substantial peak during a small number of hours each day. Policymakers are aware of the potential efficiency savings that may be generated from a shift in energy consumption away from peak times. Smart meters, in conjunction with time-of-use (TOU) pricing, can facilitate an improvement in energy efficiency by providing consumers with enhanced information about electricity consumption and costs, and thereby encourage a shift away from consumption during peak hours. In 2009-10, the Irish Commission for Energy Regulation (CER) co-ordinated a randomised controlled trial in the Irish residential electricity market. Smart meters, which replaced the existing mechanical meter readers, were introduced in approximately 5,000 households. Participants were divided into control and treatment groups, with treatment groups exposed to a variety of TOU tariffs and information stimuli (in-home display (IHD) units, monthly billing, etc.). Data was collected over approximately 18 months, with the first half year being used as a control period. This paper analyses the response of Irish households to the introduction of TOU tariffs and information stimuli. We examine how households responded to the different TOU tariffs, at different times of the day (peak, day and night) and in conjunction with different information stimuli. Finally, we examine the variation in our results across households of differing socio-economic status (as proxied by education levels). We find that TOU tariffs and information stimuli have a significant effect in reducing electricity consumption in Ireland, particularly during peak hours. However, while households reduce peak demand significantly after the introduction of TOU tariffs and associated information, there is little incremental response to increasing differentials between peak and off-peak prices.

Suggested Citation

  • Di Cosmo, Valeria & Lyons, Sean & Nolan, Anne, 2012. "Estimating the impact of time-of-use pricing on Irish electricity demand," MPRA Paper 39971, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:39971
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    Cited by:

    1. repec:eee:joepsy:v:61:y:2017:i:c:p:1-14 is not listed on IDEAS
    2. Cédric Clastres & Haikel Khalfallah, 2014. "An analytical approach for elasticity of demand activation with demand response mechanisms," Working Papers halshs-01019679, HAL.
    3. Clastres, Cédric & Khalfallah, Haikel, 2015. "An analytical approach to activating demand elasticity with a demand response mechanism," Energy Economics, Elsevier, vol. 52(PA), pages 195-206.
    4. Weber, Sylvain & Puddu, Stefano & Pacheco, Diana, 2017. "Move it! How an electric contest motivates households to shift their load profile," Energy Economics, Elsevier, vol. 68(C), pages 255-270.
    5. repec:eee:ejores:v:267:y:2018:i:2:p:643-658 is not listed on IDEAS
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    8. Curtis, John & Devitt, Niamh & di Cosmo, Valeria & Farrell, Niall & FitzGerald, John & Hyland, Marie & Lynch, Muireann & Lyons, Sean & McCoy, Daire & Malaguzzi Valeri, Laura & Walsh, Darragh, 2014. "Irish Energy Policy: An Analysis of Current Issues," Research Series, Economic and Social Research Institute (ESRI), number rs37 edited by FitzGerald, John & Malaguzzi Valeri, Laura.
    9. Bertsch, Valentin & Geldermann, Jutta & Lühn, Tobias, 2017. "What drives the profitability of household PV investments, self-consumption and self-sufficiency?," MPRA Paper 78644, University Library of Munich, Germany.
    10. repec:aen:journl:ej38-6-pon is not listed on IDEAS
    11. Boßmann, Tobias & Eser, Eike Johannes, 2016. "Model-based assessment of demand-response measures—A comprehensive literature review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 57(C), pages 1637-1656.
    12. Cédric Clastres & Haikel Khalfallah, 2015. "An Analytical Approach to Activating Demand Elasticity with a Demand Response Mechanism," Post-Print hal-01222582, HAL.
    13. Thakur, Jagruti & Chakraborty, Basab, 2016. "Demand side management in developing nations: A mitigating tool for energy imbalance and peak load management," Energy, Elsevier, vol. 114(C), pages 895-912.
    14. repec:eee:appene:v:204:y:2017:i:c:p:1-15 is not listed on IDEAS
    15. Cosmo, Valeria Di & O’Hora, Denis, 2017. "Nudging electricity consumption using TOU pricing and feedback: evidence from Irish households," Journal of Economic Psychology, Elsevier, vol. 61(C), pages 1-14.

    More about this item

    Keywords

    household electricity demand; electricity pricing; smart metering;

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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