Paying consumers to increase their consumption can reduce the cost of integrating wind and solar electricity production into the grid

a column by Laura Mørch Andersen, Lars Gårn Hansen, Carsten Lynge Jensen and Frank Wolak for VOX: CEPR’s Policy Portal

Increased reliance on solar and wind power has changed the approach to managing peak demand.

The column details the results of a Danish experiment designed to flatten demand in which customers were randomly assigned to receive rebates based on how much consumption they could shift between periods of the day. Asking customers to shift consumption to periods of low net demand would create daily cost savings of €100,000 for the utility in question. Paradoxically, demand-shifting reduces the need for installed generation capacity, but increases overall demand.

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