Do Benefits from Dynamic Tariffing Rise? Welfare Effects of Real-Time Retail Pricing Under Carbon Taxation and Variable Renewable Electricity Supply

Aufsätze referiert extern - Web of Science

Christian Gambardella, Michael Pahle, Wolf-Peter Schill

In: Environmental & Resource Economics 75 (2020), S. 183-213


We analyze the gross welfare gains from real-time retail pricing in electricity markets where carbon taxation induces investment in variable renewable technologies. Applying a stylized numerical electricity market model, we find a U-shaped association between carbon taxation and gross welfare gains. The benefits of introducing real-time pricing can accordingly be relatively low at relatively high carbon taxes and vice versa. The non-monotonous change in welfare gains can be explained by corresponding changes in the inefficiency arising from “under-consumption” during low-price periods rather than by changes in wholesale price volatility. Our results may cast doubt on the efficiency of ongoing roll-outs of advanced meters in many electricity markets, since net benefits might only materialize at relatively high carbon tax levels and renewable supply shares.

Wolf-Peter Schill

Deputy Head of Department in the Energy, Transportation, Environment Department

JEL-Classification: D04;D10;D47;L10;L51;L94;Q41;Q42;Q47
Keywords: Real-time pricing, Variable renewable electricity, Carbon tax, Welfare analysis, Partial equilibrium modeling
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