Are dynamic tariffs effective in reducing energy poverty? Empirical evidence from US households
Diogo Santos Pereira, António Cardoso Marques
Abstract
Statistics from the United States (US) Energy Information Administration and the US Census Bureau reveal that a growing number of households are threatened by energy poverty. Both argue that energy poverty is becoming more common than traditional poverty. Recently, dynamic pricing programmes have been made possible by the increasing use of smart meters and other devices which enable consumers to play a more active role in electricity systems. This study aims to determine if dynamic pricing programmes can reduce the energy burden on households and diminish the number suffering from energy poverty. Data from the Annual Electric Power Industry Report and the American Community Survey were merged and analysed by state and year to assess the impact of dynamic pricing on energy poverty for 51 US states from 2013 until 2021. The results show that time-of-use and critical-peak-pricing tariffs can reduce the number of households suffering from energy poverty. Conversely, CPP and RTP increase the number of households in energy poverty. These findings indicate that policymakers and retailers need to develop pricing programmes that will encourage consumers to modify their consumption habits and enhance the integration of intermittent renewable energy sources and reduce energy poverty.