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 language | English (US) |
|---|---|
| Pages (from-to) | 820-842 |
| Number of pages | 23 |
| Journal | Resource and Energy Economics |
| Volume | 33 |
| Issue number | 4 |
| DOIs | |
| State | Published - Nov 2011 |
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Keywords
- Energy demand
- Randomized field experiments
- Real time electricity pricing
ASJC Scopus subject areas
- Economics and Econometrics
Cite this
Rethinking real-time electricity pricing. / Allcott, Hunt.
In: Resource and Energy Economics, Vol. 33, No. 4, 11.2011, p. 820-842.Research output: Contribution to journal › Article
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TY - JOUR
T1 - Rethinking real-time electricity pricing
AU - Allcott, Hunt
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
UR - http://www.scopus.com/inward/record.url?scp=79960308065&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=79960308065&partnerID=8YFLogxK
U2 - 10.1016/j.reseneeco.2011.06.003
DO - 10.1016/j.reseneeco.2011.06.003
M3 - Article
AN - SCOPUS:79960308065
VL - 33
SP - 820
EP - 842
JO - Resources and Energy Economics
JF - Resources and Energy Economics
SN - 0928-7655
IS - 4
ER -