Do Benefits from Dynamic Tariffing Rise? Welfare Effects of Real-Time Retail Pricing Under Carbon Taxation and Variable Renewable Electricity Supply

Christian Gambardella (), Michael Pahle () and Wolf-Peter Schill
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Christian Gambardella: Potsdam Institute for Climate Impact Research
Michael Pahle: Potsdam Institute for Climate Impact Research

Environmental & Resource Economics, 2020, vol. 75, issue 1, No 8, 183-213

Abstract: Abstract We analyze the gross welfare gains from real-time retail pricing in electricity markets where carbon taxation induces investment in variable renewable technologies. Applying a stylized numerical electricity market model, we find a U-shaped association between carbon taxation and gross welfare gains. The benefits of introducing real-time pricing can accordingly be relatively low at relatively high carbon taxes and vice versa. The non-monotonous change in welfare gains can be explained by corresponding changes in the inefficiency arising from “under-consumption” during low-price periods rather than by changes in wholesale price volatility. Our results may cast doubt on the efficiency of ongoing roll-outs of advanced meters in many electricity markets, since net benefits might only materialize at relatively high carbon tax levels and renewable supply shares.

Keywords: Real-time pricing; Variable renewable electricity; Carbon tax; Welfare analysis; Partial equilibrium modeling (search for similar items in EconPapers)
JEL-codes: D04 D10 D47 L10 L51 L94 Q41 Q42 Q47 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10640-019-00393-0

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