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Residential Substitution of Off-peak for Peak Electricity Usage under Time-of-Use Pricing

Douglas W. Caves and Laurits R. Christensen

Year: 1980
Volume: Volume 1
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol1-No2-4
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Abstract:
This article reports on the methodology, procedures, and conclusions from the first phase of our econometric analysis of the Wisconsin Time-of-Use (TOU) Electricity Pricing Experiment.' Dur-ing Phase I, which took place during the summers of 1976 and 1977, we confined our attention to assessing consumer ability and/or willingness to shift electricity usage from peak to off-peak (P/OP)



The Long-Run Efficiency of Real-Time Electricity Pricing

Severin Borenstein

Year: 2005
Volume: Volume 26
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol26-No3-5
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Abstract:
Retail real-time pricing (RTP) of electricity � retail pricing that changes hourly to reflect the changing supply/demand balance � is very appealing to economists because it �sends the right price signals.� Economic efficiency gains from RTP, however, are often confused with the short-term wealth transfers from producers to consumers that RTP can create. Abstracting from transfers, I focus on the long-run efficiency gains from adopting RTP in a competitive electricity market. Using simple simulations with realistic parameters, I demonstrate that the magnitude of efficiency gains from RTP is likely to be significant even if demand shows very little elasticity. I also show that �time-of-use� pricing, a simple peak and off-peak pricing system, is likely to capture a very small share of the efficiency gains that RTP offers.



Distributed Renewable Energy Investment: The Effect of Time-of-Use Pricing

Lu-Miao Li, Peng Zhou, and Wen Wen

Year: 2023
Volume: Volume 44
Number: Number 5
DOI: 10.5547/01956574.44.5.luli
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Abstract:
This paper examines the effects of time-of-use (TOU) pricing on distributed renewable energy (DRE) investment for a non-power generating firm. We develop an electricity consumption cost-minimization model by considering the intermittent generation as well as the firm's electricity consumption. It has been found that implementing full retail prices compensation for the surplus renewable electricity is probably not good as it may lead to DRE over-investment. Moreover, we find that the firm's optimal investment strategy is not necessarily sensitive to the price signal of TOU pricing (i.e., the ratio of peak to off-peak price). Particularly, when the service-level difference in meeting a firm's electricity consumption between peak and off-peak periods by adopting DRE technology is above a critical threshold in relation to the peak time, a strong price signal will not promote the firm's optimal DRE capacity investment. This paper yields a policy insight that "getting the time right" may be more important than "getting the price right" in terms of enabling DRE investment for TOU pricing design.





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