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Real-Time Pricing and the Cost of Clean Power

Author

Listed:
  • Imelda
  • Matthias Fripp
  • Michael J. Roberts

Abstract

Solar and wind power are now cheaper than fossil fuels but are intermittent. The extra supply-side variability implies growing benefits of using real-time retail pricing (RTP). We evaluate the potential gains of RTP using a model that jointly solves investment, supply, storage, and demand to obtain a chronologically detailed dynamic equilibrium for the island of Oahu, Hawai'i. We find that, holding demand assumptions fixed, RTP reduces costs in high-renewable systems by roughly 6 to 12 times as much as in fossil systems, markedly lowering the cost of clean energy integration.

Suggested Citation

  • Imelda & Matthias Fripp & Michael J. Roberts, 2024. "Real-Time Pricing and the Cost of Clean Power," American Economic Journal: Economic Policy, American Economic Association, vol. 16(4), pages 100-141, November.
    • Handle: RePEc:aea:aejpol:v:16:y:2024:i:4:p:100-141
    DOI: 10.1257/pol.20220506
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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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