Rethinking real-time electricity pricing

Hunt Allcott

    Research output: Contribution to journalArticlepeer-review

    Abstract

    Most US consumers are charged a near-constant retail price for electricity, despite substantial hourly variation in the wholesale market price. This paper evaluates the first program to expose residential consumers to hourly real-time pricing (RTP). I find that enrolled households are statistically significantly price elastic and that consumers responded by conserving energy during peak hours, but remarkably did not increase average consumption during off-peak times. The program increased consumer surplus by $10 per household per year. While this is only one to two percent of electricity costs, it illustrates a potential additional benefit from investment in retail Smart Grid applications, including the advanced electricity meters required to observe a household's hourly consumption.

    Original languageEnglish (US)
    Pages (from-to)820-842
    Number of pages23
    JournalResource and Energy Economics
    Volume33
    Issue number4
    DOIs
    StatePublished - Nov 2011

    Keywords

    • Energy demand
    • Randomized field experiments
    • Real time electricity pricing

    ASJC Scopus subject areas

    • Economics and Econometrics

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