Is mandating "smart meters" smart?

Thomas-Olivier Léautier

No 747, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: The advent of "smart meters" will make possible Real Time Pricing of electricity: customers will face and react to wholesale spot prices, thus consumption of electric power will be aligned with its opportunity cost. This article determines the marginal value of a fraction of demand (or a consumer) switching to Real Time Pricing. First, it derives this marginal value for a simple yet realistic specification of demand. Second, using data from the French power market, it estimates that, for the vast majority of residential customers whose peak demand is lower than 6 kV A, the net surplus from switching to Real Time Pricing is lower than 1 euro/year for low demand elasticity, 4 euros/year for high demand elasticity. This finding casts a doubt on the economic value of rolling out smart meters to all residential customers, for both policy makers and power suppliers.

Keywords: electric power markets; demand response; smart grid (search for similar items in EconPapers)
JEL-codes: D61 L11 L94 (search for similar items in EconPapers)
Date: 2012-10
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Is Mandating "Smart Meters" Smart? (2014)
Working Paper: Is mandating "smart meters" smart? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ide:wpaper:26342

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