Dynamic electricity pricing—Which programs do consumers prefer?

Abstract

Dynamic pricing is being discussed as one method of demand side management (DSM) which could be crucial for integrating more renewable energy sources into the electricity system. At the same time, there have been very few analyses of consumer preferences in this regard: Which type of pricing program are consumers most likely to choose and why? This paper sheds some light on these issues based on two empirical studies from Germany: (1) A questionnaire study including a conjoint analysis-design and (2) A field experiment with test-residents of a smart home laboratory. The results show that consumers are open to dynamic pricing, but prefer simple programs to complex and highly dynamic ones; smart home technologies including demand automation are seen as a prerequisite for DSM. The study provides some indications that consumers might be more willing to accept more dynamic pricing programs if they have the chance to experience in practice how these can be managed in everyday life. At the same time, the individual and societal advantages of such programs are not obvious to consumers. For this reason, any market roll-out will need to be accompanied by convincing communication and information campaigns to ensure that these advantages are perceived.