TY - JOUR
T1 - Rethinking real-time electricity pricing
AU - Allcott, Hunt
N1 - Funding Information:
I thank, without implicating, Alberto Abadie, Severin Borenstein, Ken Gillingham, Michael Greenstone, Bill Hogan, Erich Muehlegger, Larry Katz, Erin Mansur, Sendhil Mullainathan, Paul Niehaus, Chris Nosko, Ariel Pakes, Dave Rapson, Rob Stavins, Frank Wolak, and seminar participants at Duke, Georgetown, Harvard, IBS Hyderabad, Michigan, NYU Department of Economics, NYU Stern, Notre Dame, Resources for the Future, Stanford, Tufts, and UC Davis. Thanks also to the Editor and to two anonymous referees. Anne Evens, Marjorie Isaacson, Larry Kotewa, and Anthony Star of the Center for Neighborhood Technology facilitated my access to the household electricity demand data. Financial support is acknowledged from the Harvard University Center for the Environment and from the Joseph Crump Fellowship, which is granted by the Harvard Environmental and Natural Resources Program and the Harvard Center for Business and Government.
PY - 2011/11
Y1 - 2011/11
N2 - 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.
AB - 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.
KW - Energy demand
KW - Randomized field experiments
KW - Real time electricity pricing
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U2 - 10.1016/j.reseneeco.2011.06.003
DO - 10.1016/j.reseneeco.2011.06.003
M3 - Article
AN - SCOPUS:79960308065
SN - 0928-7655
VL - 33
SP - 820
EP - 842
JO - Resource and Energy Economics
JF - Resource and Energy Economics
IS - 4
ER -