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

Yale SOM Working Paper No. ES-41

UC Energy Institute CSEM Working Paper No. 136

40 Pages Posted: 8 Jun 2005  

Stephen P. Holland

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

Erin T. Mansur

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

Multiple version iconThere are 2 versions of this paper

Date Written: May 11, 2005

Abstract

Real-time pricing (RTP) of electricity would improve the efficiency of consumption and investment and would lessen the potential harm from market power. Conventional wisdom has claimed that RTP has an additional environmental benefit. We argue that RTP will reduce variance of electricity load and estimate the short-run impacts of a reduction in variance on emissions of SO2, NOx, and CO2. According to our estimates, a reduction in load variance, either within- or across-day, would decrease emissions in regions where peak demand is met with oil-fired capacity rather than hydroelectric capacity. These regions include the Mid-Atlantic and Illinois areas. However, reducing variance would increase emissions in regions with more hydroelectric capacity, such as the Eastern Mid-West, the Southeast, the Great Plains, and the West. The effects are relatively small.

Keywords: real-time pricing, externalities, electricity markets, regulation

JEL Classification: L51, L94, Q53

Suggested Citation

Holland, Stephen P. and Mansur, Erin T., Is Real-Time Pricing Green?: The Environmental Impacts of Electricity Demand Variance (May 11, 2005). ; UC Energy Institute CSEM Working Paper No. 136. Available at SSRN: https://ssrn.com/abstract=738524

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

Tuck School of Business at Dartmouth ( 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

Paper statistics

Downloads
211
Rank
104,477
Abstract Views
4,345