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Do households respond to Time-Of-Use tariffs? Evidence from Australia

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  • Burns, Kelly
  • Mountain, Bruce

Abstract

We estimate the elasticity of substitution for households on Time-Of-Use (TOU) tariffs using a sample of 6957 electricity bills from households in Victoria, Australia. Across the full sample we find the difference between peak and off-peak prices has little influence on the difference between peak and off-peak consumption and is not affected by access to rooftop photovoltaics. Households in the lowest socio-economic areas do not respond to differences in peak and off-peak prices. Our findings of the elasticity of substitution are remarkably similar to previous studies of TOU tariffs in the United States of America in the 1980s. This suggests retail market deregulation, the installation of smart meters, consumers' access to their consumption data and enduring policy support for TOU tariffs has not been rewarded with any measurable improvement in consumers' responsiveness to time-varying prices. While freedom to select TOU tariffs is valuable, these findings do not support the imposition of TOU tariffs as a default pricing policy.

Suggested Citation

  • Burns, Kelly & Mountain, Bruce, 2021. "Do households respond to Time-Of-Use tariffs? Evidence from Australia," Energy Economics, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:eneeco:v:95:y:2021:i:c:s0140988320304102
    DOI: 10.1016/j.eneco.2020.105070
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    3. Shin, Hyun Ho & Kim, Kibong & Lee, Minwoo & Han, Changho & Kim, Yongchan, 2024. "Maximized thermal energy utilization of surface water-source heat pumps using heat source compensation strategies under low water temperature conditions," Energy, Elsevier, vol. 288(C).
    4. Nakai, Miwa & von Loessl, Victor & Wetzel, Heike, 2024. "Preferences for dynamic electricity tariffs: A comparison of households in Germany and Japan," Ecological Economics, Elsevier, vol. 223(C).
    5. Kim, Kyungah & Choi, Jihye & Lee, Jihee & Lee, Jongsu & Kim, Junghun, 2023. "Public preferences and increasing acceptance of time-varying electricity pricing for demand side management in South Korea," Energy Economics, Elsevier, vol. 119(C).
    6. Hari Agung Yuniarto & Nur Mayke Eka Normasari & Sella Friscilla Silalahi & Irene Clarisa Gunawan & Deendarlianto & Indra Ardhanayudha Aditya & Arionmaro Asi Simaremare & Fajar Nurrohman Haryadi, 2024. "Customer behaviour towards energy usage with time of use tariff: a systematic literature review," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 23(1), pages 44-61, February.
    7. Hampton, Harrison & Foley, Aoife M. & Del Rio, Dylan Furszyfer & Sovacool, Benjamin, 2022. "Developing future retail electricity markets with a customer-centric focus," Energy Policy, Elsevier, vol. 168(C).

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    More about this item

    Keywords

    Time-Of-Use; Load shifting; Elasticity of substitution; Electricity;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation

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