Discussion Papers,
Statistics Norway, Research Department

Abstract: Offering electricity consumers time-differentiated tariffs may increase demand responsiveness, thereby reducing peak consumption. However, one concern is that time-differentiated tariffs may also attract consumers who benefit because of their consumption pattern, even without a corresponding demand response. A discrete choice model applied to data from a residential dynamic pricing experiment indicates that higher demand flexibility increases the propensity of a household to select dynamic tariffs, while favourable consumption patterns do not influence the tariff choice. The offering of dynamic time-differentiated tariffs is then likely to increase the demand response among residential consumers.

Keywords: demand response; dynamic pricing; electricity tariff; self-selection; rate option.

JEL-codes: D10; Q41 February 2006

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