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Which Households Respond to Electricity Peak Pricing Amid High Levels of Electrification?

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  • Cloé Garnache
  • Øystein Hernæs
  • Anders Gravir Imenes

Abstract

We examine heterogeneity in Norwegian households’ price responses to critical peak pricing (CPP) on electricity consumption, using a large-scale randomized controlled trial (RCT), high-frequency electricity data, and default enrollment. Increasing the grid transmission charge by 4,067% (corresponding to an increase in the electricity price by 1,242%) leads to a 12.5% reduction in consumption, and virtually eliminates the consumption “peak”. In contrast to prior studies from less electrified countries, the effect is broad-based, and similar across income groups. These findings provide a unique lens into the effectiveness of demand-based policies, and their impact across household groups, in a more electrified future.

Suggested Citation

  • Cloé Garnache & Øystein Hernæs & Anders Gravir Imenes, 2022. "Which Households Respond to Electricity Peak Pricing Amid High Levels of Electrification?," CESifo Working Paper Series 9657, CESifo.
    • Handle: RePEc:ces:ceswps:_9657
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    References listed on IDEAS

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    6. Matthew Harding & Steven Sexton, 2017. "Household Response to Time-Varying Electricity Prices," Annual Review of Resource Economics, Annual Reviews, vol. 9(1), pages 337-359, October.
    7. Laura Mørch Andersen & Lars Gårn Hansen & Carsten Lynge Jensen & Frank A. Wolak, 2019. "Can Incentives to Increase Electricity Use Reduce the Cost of Integrating Renewable Resources," NBER Working Papers 25615, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Cabot, Clément & Villavicencio, Manuel, 2024. "Second-best electricity pricing in France: Effectiveness of existing rates in evolving power markets," Energy Economics, Elsevier, vol. 136(C).

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    More about this item

    Keywords

    critical peak pricing; grid transmission charge; peak demand; household heterogeneity; RCT; default enrollment; electrification;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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