Dynamic Pricing and the Peak Electricity Load Problem

Abstract

Reforms to Australia's 45,000 MW electricity market were met with remarkable success, but wholesale market gains have been largely exhausted. Above-trend growth in investment in energy infrastructure is driving retail prices to levels that triggered the sectoral assault in the first place. This pressure should initiate the last piece of the reform puzzle-removing price regulation, installing smart meters and implementing dynamic pricing to halt the primary cause of the problem, rapidly rising peak demand. We find that such a change can lead to non-trivial reductions in household peak demand, with our sample load factor improving by 9 percentage points. © 2012 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.