Anette Boom () and Sebastian Schwenen ()
Anette Boom: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Porcelaenshaven 16 A, 1., DK-2000 Frederiksberg, Denmark
Sebastian Schwenen: DIW Berlin, German Institute for Economic Research
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.
39 pages, October 21, 2013
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