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

Shaun D. McRae; Frank A. Wolak

doi:10.1016/j.jeem.2021.102541

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 journal › Article › Research › peer-review

4 Citations (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 language	English
Article number	102541
Number of pages	23
Journal	Journal of Environmental Economics and Management
Volume	110
DOIs	https://doi.org/10.1016/j.jeem.2021.102541
Publication status	Published - Oct 2021
Externally published	Yes

Keywords

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

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jeem.2021.102541

Cite this

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title = "Retail pricing in Colombia to support the efficient deployment of distributed generation and electric stoves",

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.",

keywords = "Cookstoves, Developing countries, Distributional effects, Energy transition, Fixed charges, Rooftop solar, Tariff design",

author = "McRae, {Shaun D.} and Wolak, {Frank A.}",

note = "Funding Information: We thank seminar participants and discussants at the Inter-American Development Bank (IDB), ITAM, FGV CERI, the Boise State Energy Policy Conference, the Environment for Development annual meeting, the SETI workshop, the World Bank?Toulouse School of Economics #Infra4Dev conference, the EAERE annual meeting, and the Transportation and Public Utilities Group meetings, for their many helpful comments and suggestions. Pedro Liedo provided excellent research assistance. This paper was part of the IDB project ?The Regulation of Public Utilities of the Future in Latin America and the Caribbean?. We thank the IDB for their generous feedback and support for this research. McRae also gratefully acknowledges financial support from the Asociaci?n Mexicana de Cultura, A.C. Publisher Copyright: {\textcopyright} 2021 Elsevier Inc.",

year = "2021",

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doi = "10.1016/j.jeem.2021.102541",

language = "English",

volume = "110",

journal = "Journal of Environmental Economics and Management",

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AU - McRae, Shaun D.

AU - Wolak, Frank A.

N1 - Funding Information: We thank seminar participants and discussants at the Inter-American Development Bank (IDB), ITAM, FGV CERI, the Boise State Energy Policy Conference, the Environment for Development annual meeting, the SETI workshop, the World Bank?Toulouse School of Economics #Infra4Dev conference, the EAERE annual meeting, and the Transportation and Public Utilities Group meetings, for their many helpful comments and suggestions. Pedro Liedo provided excellent research assistance. This paper was part of the IDB project ?The Regulation of Public Utilities of the Future in Latin America and the Caribbean?. We thank the IDB for their generous feedback and support for this research. McRae also gratefully acknowledges financial support from the Asociaci?n Mexicana de Cultura, A.C. Publisher Copyright: © 2021 Elsevier Inc.

PY - 2021/10

Y1 - 2021/10

N2 - 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.

AB - 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.

KW - Cookstoves

KW - Developing countries

KW - Distributional effects

KW - Energy transition

KW - Fixed charges

KW - Rooftop solar

KW - Tariff design

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

Abstract

Keywords

UN SDGs

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