Recent experiences with tariffs for saving electricity in households. (April 2018)

• Record Type: Journal Article
• Authors: Prasanna, Ashreeta; Mahmoodi, Jasmin; Brosch, Tobias; Patel, Martin K.
• Is Part Of: Energy policy. Volume 115(2018)
• Page Start: 514
• Page End: 522
• Publication Date: 2018-04
• Subjects: PT Progressive tariff -- ESFIT Electricity saving feed-in tariff; Residential energy efficiency -- Price elasticity of electricity -- Electricity saving feed-in tariffs -- Progressive tariffs -- Prospect theory -- Loss aversion -- Energy efficiency tariffs; Energy policy -- Periodicals; Politique énergétique -- Périodiques; Electronic journals; 333.79
• DOI: 10.1016/j.enpol.2018.01.044
• Languages: English
• ISSNs: 0301-4215

Abstract

Abstract: Financial incentives or disincentives in the form of electricity tariffs can be used to encourage energy efficiency. In this paper, two simple tariffs aimed at residential consumers are reviewed: progressive tariffs (PTs), which penalise high consumption of electricity, and electricity saving feed-in tariffs (ESFITs), which provide incentives to reduce consumption of electricity. The effectiveness of these tariffs is quantified and compared using the price elasticity (for PT) and an incentive elasticity (for ESFIT). The results indicate that PTs are more effective in mobilising electricity saving than ESFITs and confirm biases in human decision-making (here loss aversion). While further research is necessary, we propose a tariff which would motivate consumers to reduce their consumption by offering both an incentive for reaching an energy saving goal and a disincentive for failing to reach this goal. The flexibility of such a tariff makes it a promising solution suitable for application in countries with a comparatively high household income and liberalised retail electricity market. Highlights: Two types of tariffs for saving electricity are reviewed. Their effectiveness is quantified using price elasticity or incentive elasticity. We find tariffs with a penalty more effective than those providing an incentive. A tariff which includes both incentives and penalties is proposed.