The hidden cost of real time electricity pricing
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The hidden cost of real time electricity pricing. / Bejan, Ioana; Jensen, Carsten Lynge; Andersen, Laura Mørch; Hansen, Lars Gårn.
Department of Food and Resource Economics, University of Copenhagen, 2019.Research output: Working paper › Research
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TY - UNPB
T1 - The hidden cost of real time electricity pricing
AU - Bejan, Ioana
AU - Jensen, Carsten Lynge
AU - Andersen, Laura Mørch
AU - Hansen, Lars Gårn
PY - 2019
Y1 - 2019
N2 - 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.
AB - 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.
M3 - Working paper
T3 - IFRO Working Paper
BT - The hidden cost of real time electricity pricing
PB - Department of Food and Resource Economics, University of Copenhagen
ER -
ID: 225663168