Rethinking real-time electricity pricing |
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Authors: | Hunt Allcott |
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Institution: | Department of Economics, New York University, 19 W. 4th St., 6th Floor, New York, NY 10012, United States |
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Abstract: | Most US consumers are charged a near-constant retail price for electricity, despite substantial hourly variation in the wholesale market price. This paper evaluates the first program to expose residential consumers to hourly real-time pricing (RTP). I find that enrolled households are statistically significantly price elastic and that consumers responded by conserving energy during peak hours, but remarkably did not increase average consumption during off-peak times. The program increased consumer surplus by $10 per household per year. While this is only one to two percent of electricity costs, it illustrates a potential additional benefit from investment in retail Smart Grid applications, including the advanced electricity meters required to observe a household’s hourly consumption. |
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