Market Failures in Real-Time Metering: A Theoretical Look

Restructuring the electricity market may secure efficiencies by moving away from cost-of-service regulation, with typically (but not necessarily) time-invariant prices, and allowing prices to reflect how costs change. Charging "real time" prices requires that electricity use be measured according to when one uses it. Arguments that such real-time metering should be a policy objective promoted by subsidizing meters or delaying restructuring until meters are installed, require more than these potential benefits. They require positive externalities to imply that too few meters would be installed through private transactions. Real-time metering presents no systematic externalities when utilities must serve peak period users, and may present negative externalities under some conditions. Positive externalities are likely when electricity is rationed through blackouts. Real-time metering may or may not increase welfare when peak period wholesale markets are not competitive; one might want to prohibit real-time metering in such situations even if metering itself were costless.


Issue Date:
2002
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/10718
Total Pages:
28
JEL Codes:
D45; D62; L11; L94
Series Statement:
Discussion Paper 02-53




 Record created 2017-04-01, last modified 2017-08-23

Fulltext:
Download fulltext
PDF

Rate this document:

Rate this document:
1
2
3
 
(Not yet reviewed)