Are Residential Electricity Prices Too High or Too Low? Or Both?

  title={Are Residential Electricity Prices Too High or Too Low? Or Both?},
  author={James Bushnell},
Advocates of market mechanisms for addressing greenhouse gases and other pollutants typically argue that it is a necessary step in pricing polluting goods at their social marginal cost (SMC). Electricity prices, however, deviate from social marginal cost for many reasons, some of which cause prices to be too low–such as pollution externalities–and others cause prices to be too high–such as recovery of fixed costs. Furthermore, because electricity is not storable, marginal cost can fluctuate… 
Harvesting Solar Power Foments Prices in a Vicious Cycle: Breaking the Cycle with Price Mechanisms
Distributed solar power generation is growing but not necessarily benefiting the utility firms. Reducing the demand, it hinders the coverage of utility costs with reasonable retail electricity
Wholesale Electricity Market Design for Decarbonization: Research Opportunities
I review several prominent wholesale electricity market design challenges presently facing policy makers, explain their importance with respect to decarbonization of the energy system, and identify a
Electricity Markets and Environmental Policy
I use a supply function equilibrium framework to show how increased renewable generation can increase electricity generators’ incentive to withhold capacity. As a result, strategic behavior from
Power Relationships: Marginal Cost Pricing of Electricity and Social Sustainability of Renewable Energy Projects
  • S. Srinivasan
  • Economics
    Technology and Economics of Smart Grids and Sustainable Energy
  • 2019
The days of Feed-in-Tariff programs to promote Renewable Energy (RE) capacity addition might be behind us. With RE generation constituting increasing proportions of the generation mix across several
The Increasing Cost of Ignoring Coase: Inefficient Electricity Tariffs, Welfare Loss and Distributed Energy Resources
I show that British electricity tariffs create substantial welfare loss, equivalent to between six and eighteen percent of domestic consumption value. Losses are greater than unpriced distributional
Efficient Pricing of Electricity Revisited
Increasing shares of renewables challenge the classical way to trade electricity ex-ante: Coal power plants cannot react to the stochastic element of renewables, whereas gas turbines can. We use a
Is real-time pricing smart for consumers?
We examine the effects of real-time pricing on welfare and consumer surplus in electricity markets. We model consumers on real-time pricing who purchase electricity on the wholesale market. A second
Vertical Structure and the Risk of Rent Extraction in the Electricity Industry
This paper studies how competition and vertical structure jointly determine generating capacities, retail prices, and welfare in the electricity industry. Analyzing a model in which demand is
Vertical Structure and the Risk of Rent Extraction in the Electricity Industry Anette Boom
This paper studies how competition and vertical structure jointly determine generating capacities, retail prices, and welfare in the electricity industry. Analyzing a model in which demand is


Do Americans Consume Too Little Natural Gas? An Empirical Test of Marginal Cost Pricing
A standard result in regulation is that efficiency requires that marginal prices be set equal to marginal costs. This paper performs an empirical test of marginal cost pricing in the natural gas
The Incentive to Overinvest in Energy Efficiency: Evidence from Hourly Smart-Meter Data
Many households pay a marginal price for electricity that exceeds the marginal social cost of supplying that electricity. We show evidence that such pricing schemes can create an incentive to
Peak-Load Pricing
Preliminary Draft Comments Welcome To What Electricity Price Do Consumers Respond ? Residential Demand Elasticity Under Increasing-Block Pricing
It is straightforward to evaluate how a perfectly-optimizing, perfectly-informed customer will respond to a non-linear price schedule, but such a customer is rare. In the common case of
Efficient Retail Pricing in Electricity and Natural Gas Markets
A long line of research investigates whether the retail prices of electricity and natural gas send proper signals about scarcity in order to induce efficient consumption. Historically, regulated
The Private and Public Economics of Renewable Electricity Generation
Generating electricity from renewable sources is more expensive than conventional approaches, but reduces pollution externalities. Analyzing the tradeoff is much more challenging than often presumed,
Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing
Nonlinear pricing and taxation complicate economic decisions by creating multiple marginal prices for the same good. This paper provides a framework to uncover consumers' perceived price of nonlinear
Private Net Benefits of Residential Solar PV: The Role of Electricity Tariffs, Tax Incentives, and Rebates
  • S. Borenstein
  • Economics
    Journal of the Association of Environmental and Resource Economists
  • 2017
With dramatic declines in the cost of solar PV technology since 2010, the electricity industry is in the midst of debates about whether to use this low-polluting renewable energy source in grid-scale
The Market Value and Cost of Solar Photovoltaic Electricity Production
The high cost of power from solar photovoltaic (PV) panels has been a major deterrent to the technology’s market penetration. Proponents have argued, however, that typical analyses overlook many of
The Long-Run Efficiency of Real-Time Electricity Pricing
Retail real-time pricing (RTP) of electricity Ð retail pricing that changes hourly to reflect the changing supply/demand balance Ð is very appealing to economists because it Osends the right price