Tariff complexity as a barrier to adoption: Evidence from real-time electricity pricing in New Zealand.

Résumé

We study the introduction of real-time electricity pricing in New Zealand and find evidence that its complexity is a barrier to its widespread adoption. Under this tariff, consumers face half-hourly varying spot prices, which are uncertain and volatile. Contemporaneous spot prices significantly affect consumer decisions to adopt the tariff. Consumer loyalty to the tariff increases and price sensitivity decreases with experience with real-time pricing. These results indicate that consumers lack relevant information before adoption and learn over time following adoption. The few consumers who adopted real-time pricing are wealthy and educated and are presumably curious about the tariff, suggesting that other consumers will also perceive real-time pricing as complex. Our results bring new insights to several aspects of the debate regarding ways to foster the adoption of real-time pricing, such as opt-in and opt-out policies and information provision before and after adoption. (joint with Kevin REMMY)