Estimating the Elasticity to Real Time Pricing: Evidence from the Spanish Electricity Market American Economic Association Papers & Proceedings Articles uri icon

publication date

  • May 2021

start page

  • 425

end page

  • 429

volume

  • 111

International Standard Serial Number (ISSN)

  • 2574-0768

Electronic International Standard Serial Number (EISSN)

  • 2574-0776

abstract

  • We estimate consumer response to the first large-scale real-time electricity pricing (RTP) program. In 2015, RTP became the default tariff for residential customers in Spain, exposing them to prices that vary hourly based on day-ahead wholesale prices. Using expected national wind production as an instrument for price, we estimate household-level demand elasticities for RTP households and non-RTP (placebo) households. Estimates show no difference in behavior across RTP and non-RTP households. Reasons for nonresponse may include low potential gains or high nonmonetary costs of information acquisition and behavioral change. We discuss implications for optimal dynamic electricity pricing.

subjects

  • Economics

keywords

  • demand and supply; prices; electric utilities; goverment policy; household; consumer economics