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 timeinvariant 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.
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 timeinvariant 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 language | English |
|---|---|
| Publication date | 2021 |
| Number of pages | 31 |
| Publication status | Published - 2021 |
| Event | 9th Mannheim Conference on Energy and the Environment - Online, WWW Duration: 20 May 2021 → 21 May 2021 Conference number: 9 |
Conference
| Conference | 9th Mannheim Conference on Energy and the Environment |
|---|---|
| Number | 9 |
| Location | Online |
| Country/Territory | WWW |
| Period | 20/05/2021 → 21/05/2021 |
Keywords
- Electricity
- Real-time pricing
- Market power
- Efficiency