Is Real-time Pricing Smart for Consumers?

Anette Boom, Sebastian Schwenen

Research output: Working paperResearch

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Abstract

We examine the effects of real-time pricing on welfare and consumer surplus in electricity markets. We model consumers on real-time pricing who purchase electricity on the wholesale market. A second group of consumers contracts with retailers and pays time-invariant retail prices. Electricity generating firms compete in supply functions. Increasing the number of consumers on real-time pricing increases welfare and consumer surplus of both types of consumers. Yet, risk averse consumers on traditional time-invariant retail prices are always better off. Collectively, our results point to a public good nature of demand response in power markets when consumers are risk-averse.
Original languageEnglish
Place of PublicationFrederiksberg
PublisherDepartment of Economics. Copenhagen Business School
Number of pages26
Publication statusPublished - 2020
SeriesWorking Paper / Department of Economics. Copenhagen Business School
Number12-2020

Keywords

  • Electricity
  • Real-time pricing
  • Market power
  • Efficiency

Cite this

Boom, A., & Schwenen, S. (2020). Is Real-time Pricing Smart for Consumers? Department of Economics. Copenhagen Business School. Working Paper / Department of Economics. Copenhagen Business School, No. 12-2020