The hidden cost of real time electricity pricing
Research output: Working paper › Research
In theory real time pricing ensures more efficient electricity markets than time of use pricing. However, people are prone to habits and regularity, so real time pricing may impose a greater cost of reacting on consumers. In a randomized field experiment we compared the cost of reacting to incentives under these two pricing regimes. We utilized smart-metered hourly power consumption to unobtrusively measure treatment effects. We found that real time pricing reduces consumer surplus from reacting to incentives by half, compared to reacting under a corresponding time of use pricing regime. This suggests a substantial economic value to households of the regularity and predictability provided by time of use pricing.
|Publisher||Department of Food and Resource Economics, University of Copenhagen|
|Number of pages||30|
|Publication status||Published - May 2019|
|Series||IFRO Working Paper|