THE POTENTIAL FOR REAL TIME ELECTRICITY PRICING IN SWEDEN

This paper explores the practicability of dynamic pricing, and in particular the incentives and possibilities for consumers to respond to such pricing. Using a unique and highly detailed data set from Sweden, price elasticities at the monthly level are estimated; the estimated price elasticities are insignificant. In addition, using a SUR framework, end-use specific load curves are estimated, with a view to analyzing how these correlate to possible restrictions on load shifting (e.g. the oce hours schedule). Based on these results, it is not evident that in the short-run, households have the possibility of shifting heating and lighting consumption to o-peak hours. Further, the cost reduction from shifting load from “expensive” to “cheap” hours is computed to be very small ; roughly 2-5% daily cost reduction from shifting load up to 7 hours ahead. These results have important implications for Swedish energy policy, in particular for the Swedish government’s stated goal of real-time pricing. The success of real time pricing depends heavily on demand response which, the results here indicate, are unlikely to be large without modest investments in technology and a substantial focus on it from the retailers, who appear to have little to gain from this switch in the short run.