Working Paper Series, Department of Economics, Copenhagen Business School
Real-time Pricing in Power Markets: Who Gains?
() and Sebastian Schwenen
Abstract: We examine welfare effects 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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