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Real-time electricity pricing to balance green energy intermittency

Stefan Ambec and Claude Crampes ()

No 20-1087, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: The presence of consumers able to respond to changes in wholesale electricity prices facilitates the penetration of renewable intermittent sources of energy such as wind or sun power. We investigate how adapting demand to intermittent electricity supply by making consumers price-responsive - thanks to smart meters and home automation appliances - impact the energy mix. We show that it always reduces carbon emissions. Furthermore, when consumers are not too risk-averse, demand response is socially beneficial because the loss from exposing consumers to volatile prices is more than offset by lower production and environmental costs. However, the gain is decreasing when the proportion of reactive consumers increases. Therefore, depending on the costs of the necessary smart hardware, it may be non-optimal to equip the whole population.

Keywords: electricity; intermittency; renewable dynamic pricing; demand response; smart; meters. (search for similar items in EconPapers)
JEL-codes: D24 D62 Q41 Q42 Q48 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-ene, nep-env, nep-reg and nep-res
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:124192

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