Households' self-selection of dynamic electricity tariffs

Offering electricity consumers time-differentiated tariffs may reduce peak consumption if consumers choosing the tariffs are demand responsive. However, one concern is that time-differentiated tariffs may attract consumers who benefit without responding to the price, simply because they have a favourable consumption pattern. It is thus important to understand on which basis consumers choose between tariffs. We model the choice as a function of compensating welfare measures, and use a discrete choice model on data from a residential dynamic pricing experiment. The results indicate that higher demand flexibility will tend to increase the propensity to select dynamic tariffs, while consumption patterns do not influence tariff choice significantly. (C) 2011 Elsevier Ltd. All rights reserved.