Household electricity consumers’ incentive to choose dynamic pricing under different taxation schemes

摘要

Dynamic pricing of retail electricity, as opposed to the widely applied averagernpricing, has often been proposed to enhance economic efficiency throughrndemand response. The development of variable production from renewablernenergies and expectations about the installation of heat pumps and electric vehiclesrnhas now reinforced interest in flexible demand and dynamic pricing. With arnroll-out of smart metering one important technical hurdle is going to be cleared,rnand dynamic retail pricing may soon become an eligible option for many households.rnWe quantify the potential incentives to adopt new pricing schemes usingrnexemplary Danish data. Until now, limited activity of household consumers onrnretail markets indicates that switching supplier or contract is perceived costly.rnWe apply the concept of switching costs to explain this hesitant behavior, andrnuse it to estimate a threshold level based on recent observations in the Danishrnmarket. We calculate potential savings from dynamic pricing and show how thernchoice of electricity taxation technique may hamper or enhance potential benefits.rnIn the light of switching costs, our results suggest that the combination ofrnsmart meter roll-out and dynamic pricing offerings might be insufficient to convincernthe majority of households to switch contracts and become active inrnresponse to prices, unless they hold a substantial flexibility potential. Dynamicrntaxation, even if applied to parts of the levies, could contribute significantly torninducing flexible consumption.