Incentive properties of coincident peak pricing

Ross Baldick ()
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Ross Baldick: The University of Texas

Journal of Regulatory Economics, 2018, vol. 54, issue 2, No 4, 165-194

Abstract: Abstract Coincident peak pricing is used in several electricity markets to recover the embedded cost of infrastructure, such as transmission. In this approach, measured consumption at the time of the peak is used to set charges for that pricing period or a subsequent period. If transmission costs are truly sunk, then such a recovery is unlikely to be efficient. However, in the context of growing peak demand, new additions must be built. We consider the incentive properties of coincident peak pricing when related investments are not considered to be sunk, finding that it can reproduce the incentive properties of an ideal time-varying price. We also consider several variations on this assumption.

Keywords: Coincident peak pricing; Transmission systems; Electric power system expansion (search for similar items in EconPapers)
JEL-codes: D45 D47 L94 Q41 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s11149-018-9367-9

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