Estimating the Elasticity to Real-Time Pricing: Evidence from the Spanish Electricity Market
Natalia Fabra, David Rapson, Mar Reguant, Jingyuan Wang
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.
Topics & Concepts
ElectricityPrice elasticity of demandTariffEconomicsEconometricsElectricity pricingDemand responseEconomic surplusElectricity marketElectricity demandMicroeconomicsAgricultural economicsElectricity generationPower (physics)International economicsPhysicsWelfareMarket economyQuantum mechanicsEngineeringElectrical engineeringEnergy, Environment, and Transportation PoliciesHousing Market and EconomicsEnergy Efficiency and Management