Electricity pricing for the future

In this Sustainable Energy Seminar, Bill Provencher, Professor of Agricultural and Applied Economics, will discuss the economic, environmental, and social equity considerations of electricity pricing for the future, including the effect on energy demand management programs.

Registration is required for this online seminar through WebEx Events. Click here to register for this and all other seminars as part of the Sustainable Energy Seminar series.

Abstract: Electricity pricing for the future involves three primary goals that can be in conflict: (a) economic efficiency; (b) accounting for external (in particular climate) costs in the electrical system, and (c) fairness (social equity). In this seminar I discuss the implications for all three goals in moving from the current standard pricing approach –so-called “flat-rate” pricing --to setting the price equal to the short-run social marginal cost of electricity (SRSMC pricing). I also present several “second best” alternatives to SRSMC pricing. Such a transition would have several implications for Wisconsin residents: (a) higher, dynamic prices in the short run; (b) faster transition to renewable generation; and (c) lower, flatter prices in the long run. I conclude by examining issues of social equity that could arise with SRSMC pricing.