Template-Type: ReDIF-Paper 1.0
Author-Name: Ioana Bejan
Author-Name-First: Ioana
Author-Name-Last: Bejan
Author-Email: cpz597@alumni.ku.dk
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Author-Name: Carsten Lynge Jensen
Author-Name-First: Carsten Lynge
Author-Name-Last: Jensen
Author-Email: clj@ifro.ku.dk
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Author-Name: Laura M. Andersen
Author-Name-First: Laura M.
Author-Name-Last: Andersen
Author-Email: lm@ifro.ku.dk
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Author-Name: Lars Gårn Hansen
Author-Name-First: Lars Gårn
Author-Name-Last: Hansen
Author-Email: lgh@ifro.ku.dk
Author-Workplace-Name: Department of Food and Resource Economics, University of Copenhagen
Title: The hidden cost of real time electricity pricing
Abstract: 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.
Length: 30 pages
Creation-Date: 2019-05
File-URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2019/IFRO_WP_2019_03.pdf
File-Format: Application/pdf
Number: 2019/03
Classification-JEL: L51, L94, C93, Q41
Keywords: real time electricity pricing, time of use electricity pricing, field experiment, household cost of reacting
Handle: RePEc:foi:wpaper:2019_03