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Department of Economics, Copenhagen Business School Working Paper Series, Department of Economics, Copenhagen Business School

No 01-2013:
Real-time Pricing in Power Markets: Who Gains?

Anette Boom () and Sebastian Schwenen ()

Abstract: We examine welfare e ffects of real-time pricing in electricity markets. Before stochastic energy demand is known, competitive retailers contract with final consumers who exogenously do not have real-time meters. After demand is realized, two electricity generators compete in a uniform price auction to satisfy demand from retailers acting on behalf of subscribed customers and from consumers with real-time meters. Increasing the number of consumers on real-time pricing does not always increase welfare since risk-averse consumers dislike uncertain and high prices arising through market power. In the Bertrand case, welfare is the same with all or no consumers on smart meters.

Keywords: Electricity; Real-time Pricing; Market Power; Efficiency.; (follow links to similar papers)

JEL-Codes: D42; D43; D44; L11; L12; L13; (follow links to similar papers)

39 pages, October 21, 2013

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