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Mind the Peak: The Role of Peak Demand Charges and Real-Time Pricing in Residential Electricity Flexibility

Author

Listed:
  • Marten Ovaere
  • Mark Vergouwen

Abstract

We use high-frequency electricity consumption data from a natural experiment in Flanders to study the interacting effects of real-time electricity pricing, which encourages consumption during periods of low generation cost, and peak demand charges, which discourage simultaneous demand that stresses local grids. Our matched difference-in-differences estimates show that real-time pricing increases household peak demand, while peak demand charges reduce it by 1–3% on average. Reductions are largest among electric vehicle owners, who shift up to 0.75 kWh per day to nighttime hours. These household-level responses result in lower coincident grid-level demand peaks, reducing the need for costly grid reinforcement.

Suggested Citation

  • Marten Ovaere & Mark Vergouwen, 2025. "Mind the Peak: The Role of Peak Demand Charges and Real-Time Pricing in Residential Electricity Flexibility," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 25/1115, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:25/1115
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    File URL: http://wps-feb.ugent.be/Papers/wp_25_1115.pdf
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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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