Conference Agenda

Fixed-term retail energy contracts protect end users from market fluctuations but can create market distortions, implicitly subsidizing consumption when prices increase. Imperfect information, inattention, and adjustment costs can affect the targeting of these implicit subsidies and their impact on efficient energy use. Using high-frequency consumption and billing data from an Italian utility, we study the behavior of consumers being defaulted from fixed-price into variable-price contracts during a period of high prices. We find that electricity demand is rather inelastic. Consumers adapt their consumption to price shocks with persistent lag and show limited awareness of their contract status. Their reaction also includes, to a small extent, searching the market for better offers. Fixed pricing helps prevent bill defaults and installment payments. We show that fixed-price contracts could have distributional implications by favoring smaller households with lower energy consumption per occupant.

Heat pumps have been proposed as the leading technology in the electrification of domestic heat and therefore could play a crucial part in the transition to low-carbon energy systems. However, there is very little causal evidence of the impact of heat pumps on energy demand and the impact of marginal prices to help optimize energy demand with heat pumps. We leverage a staggered roll-out of heat pumps from Octopus Energy Group to show that: (1) heat pumps have a large impact on energy demand, on average causing a 90% reduction in home gas use and a 61% increase in home electricity use -- overall, households reduced total energy demand by 40% and carbon dioxide emissions by 36% in 2024 (with an average of 68% emissions savings over the lifetime of the heat pump); (2) a time-of-use tariff designed for heat pumps can provide large demand flexibility benefits, halving electricity consumption during the evening peak to help balance the grid, and that load shifting is possible on the coldest days and from all building types in our sample; (3) the marginal value of public funds of the current UK heat pump subsidy is £1.24 (for every £1 spent by the Government). Overall, we find that heat pumps can meaningfully decarbonize heat and subsidies to encourage heat pumps can be welfare-enhancing.

This paper studies residential charging behavior of Electric Vehicles (EVs) and its potential implications for electricity distribution grids in Sweden. Using a unique data set of 4,944 households living in the municipality of Umeå, I apply fixed effects regression techniques to estimate how adoption of an EV affects a household's electricity consumption, and more specifically how the effect varies by type of EV (Battery Electric Vehicles (BEVs) and Plug-In Hybrid Vehicles(PHEVs)), and hour of the day. I find that adoption of a BEV or a PHEV increases an average household's hourly electricity consumption by 0.29 and 0.15 kWh per hour, respectively. This implies a 10-20\% increase in total residential electricity consumption. Estimates of EV charging vary significantly by hour of the day, and most charging takes place during evening hours, when grid load is typically high. This implies that residential charging of EVs will further add to peak demand if households are not provided incentives to reallocate charging to off-peak hours. However, an ancillary insight from the analysis reveals that the increase in the demand for electricity and the increased pressure on the grid could potentially be offset by solar electricity generation, provided that solar panels and energy storage can be combined at the household level. Thus, subsidizing solar panels and energy storage systems may be an effective strategy to address the growing demand for electricity and reduce grid congestion in the future.

During the energy crisis in 2022, electricity prices in Germany soared to unprecedented levels. To explore the drivers of the high electricity prices, we develop an electricity dispatch model that simulates hourly equilibrium prices under the assumption of perfect competition. We then extend this model to account for firms exercising market power. By comparing the outcomes of the perfect competition and Cournot competition models with actual market data, we demonstrate that market power may contributed to higher prices during the crisis, elevating them beyond what rising input costs alone would justify.