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Barriers to real-time electricity pricing: Evidence from New Zealand |
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| Affiliation: | 1. Stanford University, United States;2. University of Mannheim, L7 3–5, Mannheim 68161, Germany;1. Department of Quantitative Finance, National Tsing Hua University, Taiwan;2. Department of Economics, National Tsing Hua University, Taiwan;1. Federal Trade Commission United States;2. Federal Reserve Board United States;1. Institut Polytechnique de Paris, Telecom Paris, Department of Economics and Social Sciences, 19 Place Marguerite Perey, 91120 Palaiseau, France & University of Cape Town, School of Economics, Rondebosch, 7701, Cape Town, South Africa;2. Deloitte Finance, 6 Place de La Pyramide Tour Majunga Deloitte, 92800, Puteaux, France |
| Abstract: | This paper studies the introduction of real-time electricity pricing in the New Zealand residential retail market to understand why its market share remained below 1.25%. We use rich panel data of all retail switches between 2014 and 2018 and an unexpected wholesale price spike to study adoption and attrition. Exploiting the staggered roll-out of real-time pricing in different locations we find that attrition decreases with experience. We also find that prospective adopters are present biased. The combination of these findings explains why adoption stalled and shows that wholesale price spikes pose a serious threat to widespread adoption of real-time pricing. |
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