On the Optimal Design of Demand Response Policies

49 Pages Posted: 22 Jan 2016

See all articles by David Brown

David Brown

University of Alberta - Department of Economics

David E. M. Sappington

University of Florida - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 21, 2016

Abstract

The cost of supplying electricity can vary substantially from day to day and even from hour to hour. This is the case because generating units with relatively high operating costs often must be called upon to produce electricity during times of peak demand. In contrast to the ever-changing cost of supplying electricity, the retail price of electricity typically varies little, if at all, for long periods of time. Such time-invariant pricing reflects historic difficulty in measuring the precise time at which electricity is consumed and ongoing consumer resistance to time-sensitive pricing now that smart meters render such pricing feasible.

Suggested Citation

Brown, David and Sappington, David E. M., On the Optimal Design of Demand Response Policies (January 21, 2016). USAEE Working Paper No. 16-233, Available at SSRN: https://ssrn.com/abstract=2719900 or http://dx.doi.org/10.2139/ssrn.2719900

David Brown (Contact Author)

University of Alberta - Department of Economics ( email )

8-14 Tory Building
Edmonton, Alberta T6G 2H4
Canada

David E. M. Sappington

University of Florida - Department of Economics ( email )

224 Matherly Hall
Gainesville, FL 32611-7140
United States
352-392-3904 (Phone)
352-336-1420 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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