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Time-varying pricing may increase total electricity consumption: Evidence from Costa Rica

Capitán Jimenéz, Tabaré and Alpizar, Francisco and Madrigal-Ballestero, Róger and Pattanayak, Subhrendu K. (2021). Time-varying pricing may increase total electricity consumption: Evidence from Costa Rica. Resource and Energy Economics. 66 , 101264
[Research article]

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Abstract

We study the implementation of a time-varying pricing (TVP) program by a major electricity utility in Costa Rica. Because of particular features of the data, we use recently developed understanding of the two-way fixed effects differences-in-differences estimator along with event-study specifications to interpret our results. Similar to previous research, we find that the program reduces consumption during peak-hours. However, in contrast with previous research, we find that the program increases total consumption. With a stylized economic model, we show how these seemingly conflicted results may not be at odds. The key element of the model is that previous research used data from rich countries, in which the use of heating , cooling devices drives electricity consumption, but we use data from a tropical middle-income country, where very few households have heating or cooling devices. Since there is not much room for technological changes (which might reduce consumption at all times), behavioral changes to reduce consumption during peak hours are not enough to offset the increased consumption during off-peak hours (when electricity is cheaper). Our results serve as a cautionary piece of evidence for policy makers interested in reducing consumption during peak hours-the goal can potentially be achieved with TVP, but the cost is increased total consumption (c) 2021 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).

Authors/Creators:Capitán Jimenéz, Tabaré and Alpizar, Francisco and Madrigal-Ballestero, Róger and Pattanayak, Subhrendu K.
Title:Time-varying pricing may increase total electricity consumption: Evidence from Costa Rica
Series Name/Journal:Resource and Energy Economics
Year of publishing :2021
Volume:66
Article number:101264
Number of Pages:21
Publisher:ELSEVIER
ISSN:0928-7655
Language:English
Publication Type:Research article
Article category:Scientific peer reviewed
Version:Published version
Copyright:Creative Commons: Attribution 4.0
Full Text Status:Public
Subjects:(A) Swedish standard research categories 2011 > 5 Social Sciences > 502 Economics and Business > Economics
Keywords:Dynamic pricing, Energy, Behavioral adjustments, LMICs
URN:NBN:urn:nbn:se:slu:epsilon-p-114157
Permanent URL:
http://urn.kb.se/resolve?urn=urn:nbn:se:slu:epsilon-p-114157
Additional ID:
Type of IDID
DOI10.1016/j.reseneeco.2021.101264
Web of Science (WoS)000708089800001
ID Code:25981
Faculty:NJ - Fakulteten för naturresurser och jordbruksvetenskap
Department:(NL, NJ) > Dept. of Economics
Deposited By: SLUpub Connector
Deposited On:28 Oct 2021 14:25
Metadata Last Modified:28 Oct 2021 14:31

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