Flexible prices and energy efficiency: does flexible prices lead to more efficient electricity use?
Flexible electricity prices are gradually becoming more widespread among Danish households, but what is the impact on households' electricity consumption? Will it lead to more efficient use of electricity? Maybe it will lead to higher consumption for some households and lower consumption for others. These questions stand unanswered. Therefore, this project investigates which types of households that are more or less likely to choose a flexible produet, and the impact on electricity consumption for different types of households.
Flexible electricity pricing is already introduced to many Danish households. Moreover, two million households have installed remote smart meters, which means that many more households have the opportunity to choose flexible produet and organize their electricity consumption accordingly. However, what impact will it have on energy efficiency? Will it lead to more efficient use of electricity? For some households it might induce higher electricity consumption, and for ether lower.
There is a need for more research on this. Therefore, this project investigates whether some types of households are more likely to choose flexible pricing produets, and what impact it has on their consumption. This is investigated across different types of households.
BUILD has researched extensively in households' electricity consumption and everyday practices, and we wish to use that research to batter understand the impact of new pricing schemes on everyday practices demanding electricity. Electricity is consumed as part of accomplishing everyday practices. Thus, electricity use is often invisible and not reflected upon. Therefore, this project emphasizes the impact of price signals in combination with ether everyday dynamics as well as the differences across different types of households, for example regarding technical competences, lifestyle and energy consumption patterns.
The project provides new insights on the impact of flexible pricing, including recommendations to how flexible pricing schemes best ensure effective use of electricity. These recommendations will be designed together with the business partners of the project and they will be presented at a seminar, where the energy industry will be invited.
The project’s results indicate that dynamic electricity pricing have no or limited effect on household energy consumption patterns. Moreover, the project’s analyses show how dynamic electricity pricing on the one side may provide a potential for creating more demand flexibility, for example by energy savings and everyday flexibility strategies, but on the other side may enhance time-squeeze in households.
Implications
Based on the empirical results, the project provides recommendations primarily targeted actors on the Danish electricity market.
- Lower expectations to dynamic electricity pricing. First, we encourage to lower expectations to how households’ energy consumption patterns in general can be steered, for example in order to gain demand flexibility or ‘nudge’ household everyday practices. Second, we encourage to lower expectations to the potential effect of dynamic pricing on the timing and intensity of energy practices. The impact of dynamic pricing will probably increase in the future with more electric vehicles and heat pumps, but the expectation should still be that the dynamic price signal only to a little extent can affect ordinary everyday practices.
- Target households that can and will contribute to energy flexibility. Based on the results, we suggest targeting households that have the best conditions to contribute, for example in form of time and resources, and that are engaged in contributing, for example due to interest in energy concerns.
- Focus on large energy end-uses. In continuation of the previous recommendations, we encourage to prioritize the large end-uses, for example households with EVs or electric heating.
- Communicate fluctuations in electricity production and distribution with more than price signals. Price signal is a popular tool in the attempt to steer (flexible) demand, but it should not be the only one. Daily fluctuations in costs of electricity resemble other daily rhythms, such as rush hour, weather patterns or restaurant bookings, and this might be useful to communicate fluctuations in energy costs.
- Investigate the effect of dynamic pricing and potential unintended implications. The final recommendation is to repeat the investigation of the impact of dynamic pricing. During this project, the situation has changed dramatically, for example with energy supply crisis, more EVs, and greater awareness of dynamic pricing. This new situation requires new investigations, and not least to follow the development of new factors, and the potential implications for everyday practices when the price of one kWh changed hourly.
- Most, if not all, of these recommendations have been mentioned by others as well, and by repeated these, we wish to underpin their importance, and maybe point as smaller variations due to the Danish context.
Key figures
Category
Participants
| Partner | Subsidy | Auto financing |
|---|---|---|
| Norlys Energi A/S | ||
| Norlys Holding A/S | ||
| Ørsted Privatsalg El&Gas A/S |
