Can Real-Time Pricing Be Progressive? Identifying Cross-Subsidies under Fixed-Rate Electricity Tariffs

Abstract

Wholesale electricity prices can rapidly change in real-time, yet households usually face fixed-price electricity tariffs. These tariffs create implicit cross-subsidies between households, determined by the timing of consumption. We map substation data on electricity use to demographic data to identify the household characteristics associated with this cross-subsidization. We find that households in areas with low house prices and high levels of renters and elderly residents are net funders of this cross-subsidy, and may be the greatest immediate beneficiaries if real-time retail tariffs are made available. Further, cross-subsidy magnitudes are exacerbated by the wholesale price impacts from increasing solar generator penetration.