Reference

Thomas-Olivier Léautier, Is mandating smart meters smart?, The Energy Journal, vol. 35, n. 4, October 2014, pp. 135–158.

Abstract

The advent of "smart meters" will make possible Real Time Pricing of electricity: customers will face and react to wholesale spot prices, thus consumption of electric power will be aligned with its opportunity cost. This article determines the marginal value of a fraction of demand (or a consumer) switching to Real Time Pricing. First, it derives this marginal value for a simple yet realistic specification of demand. Second, using data from the French power market, it estimates that, for the vast majority of residential customers whose peak demand is lower than 6 kV A, the net surplus from switching to Real Time Pricing is lower than 1 euro/year for low demand elasticity, 4 euros/year for high demand elasticity. This finding casts a doubt on the economic value of rolling out smart meters to all residential customers, for both policy makers and power suppliers.

Keywords

electric power markets; demand response; smart grid

JEL codes

  • D61: Allocative Efficiency • Cost–Benefit Analysis
  • L11: Production, Pricing, and Market Structure • Size Distribution of Firms
  • L94: Electric Utilities

Thomas-Olivier Léautier, Is mandating "smart meters" smart?, TSE Working Paper, n. 12-341, October 8, 2012.