Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance

47 Pages Posted: 16 Oct 2007 Last revised: 17 Apr 2014

See all articles by Stephen P. Holland

Stephen P. Holland

University of California, Berkeley - Energy Institute; University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics

Erin T. Mansur

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

Real-time pricing (RTP) of electricity would improve allocative efficiency and limit wholesalers' market power. Conventional wisdom claims that RTP provides additional environmental benefits. This paper argues that RTP will reduce the variance, both within- and across-days, in the quantity of electricity demanded. We estimate the short-run impacts of this reduction on SO2, NOx, and CO2 emissions. Reducing variance decreases emissions in regions where peak demand is met more by oil-fired capacity than by hydropower, such as the Mid-Atlantic. However, reducing variance increases emissions in more US regions, namely those with more hydropower like the West. The effects are relatively small.

Suggested Citation

Holland, Stephen P. and Mansur, Erin T., Is Real-Time Pricing Green? The Environmental Impacts of Electricity Demand Variance (October 2007). NBER Working Paper No. w13508. Available at SSRN: https://ssrn.com/abstract=1021986

Stephen P. Holland (Contact Author)

University of California, Berkeley - Energy Institute ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

University of North Carolina (UNC) at Greensboro - Bryan School of Business & Economics ( email )

401 Bryan Building
Greensboro, NC 27402-6179
United States

Erin T. Mansur

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States
603 646 2398 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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