Is Real-time Pricing Smart for Consumers?

Anette Boom and Sebastian Schwenen ()

No 12-2020, Working Papers from Copenhagen Business School, Department of Economics

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.

Keywords: Electricity; Real-time pricing; Market power; Efficiency (search for similar items in EconPapers)
JEL-codes: D42 D43 D44 L11 L12 L13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2020-07-01
New Economics Papers: this item is included in nep-com, nep-ene, nep-ind and nep-reg
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Citations: View citations in EconPapers (1)

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