Is Real-time Pricing Smart for Consumers?

Anette Boom*, Sebastian Schwenen

*Corresponding author for this work

Research output: Contribution to journalJournal articleResearchpeer-review

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
JournalJournal of Regulatory Economics
Volume60
Issue number2-3
Pages (from-to)193-213
Number of pages21
ISSN0922-680X
DOIs
Publication statusPublished - Dec 2021

Bibliographical note

Published online: 09 November 2021.

Keywords

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

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