Perceived complexity and effectiveness of dynamic electricity rate designs for smart markets

Abstract

The energy transition and ongoing electrification require shifting from flat electricity rate designs to dynamic technology-enabled rate structures communicating economic signals in smart markets. Empirical data show that the acceptance of such dynamic rate designs is low, but there is a lack of evidence to explain the causes of this shortfall. In a within-subject online experiment with 271 participants, we evaluate the perceived complexity and system balancing effectiveness of four dynamic rate designs that differ in temporal and spatial characteristics. We find that both higher temporal and spatial granularity increase perceived complexity and the effectiveness of balancing supply and demand, respectively. Furthermore, we find evidence of an impact of individually perceived complexity on financial success from rate designs and diverging effects of financial success on the effectiveness of balancing supply and demand in the rate designs. The majority of participants prefer less complex rate designs, partly because of reduced perceived uncertainty.