Retail pricing in Colombia to support the efficient deployment of distributed generation and electric stoves

Shaun D. McRae, Frank A. Wolak

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

Electricity tariff reform is an essential part of the clean energy transition. Existing tariffs encourage the over-adoption of residential solar systems and the under-adoption of electric alternatives to fossil fuels. However, an efficient tariff based on fixed charges and marginal cost pricing may harm low-income households. We propose an alternative methodology for setting fixed charges based on each household's willingness to pay to consume electricity at marginal cost. Using household-level data from Colombia, we demonstrate the short-run and long-run distortions from the existing tariffs and how our new methodology could provide the economic, environmental, and health benefits from adopting clean energy technologies while still protecting low-income households from higher bills.

Original languageEnglish
Article number102541
Number of pages23
JournalJournal of Environmental Economics and Management
Volume110
DOIs
Publication statusPublished - Oct 2021
Externally publishedYes

Keywords

  • Cookstoves
  • Developing countries
  • Distributional effects
  • Energy transition
  • Fixed charges
  • Rooftop solar
  • Tariff design

Cite this