Mar Reguant, Northwestern University

Abstract:
Real-time pricing (RTP) of electricity has drawn the attention of economists because it sends more accurate price signals than flat-rate pricing schemes. However adoption of RTP has been a slow process, and it is uncertain whether RTP will benefit consumers. In this paper, we examine the distributional impacts that have occurred as a result of RTP adoption in Spain’s residential electricity market. Specifically, we examine the demographic factors that affect wealth transfers when residential consumers move onto Spain’s RTP system. We then determine whether residential electricity consumers can significantly alter these wealth transfers by being more price responsive and whether consumers can alter their surplus once on Spain’s RTP system by optimally choosing between the different RTP tariffs available to them. The welfare and distributional impacts ultimately depend on how the elasticity of consumption, risk aversion, and load profiles correlated with wealth. We explore how such parameters can be identified in our data.