
Marten Ovaere (UGent) – Mind the Peak: The Role of Peak Demand Charges and Real-Time Pricing in Residential Electricity Flexibility
Marten Ovaere (UGent) – Mind the Peak: The Role of Peak Demand Charges and Real-Time Pricing in Residential Electricity Flexibility
Room : P61
Abstract: The transition to a zero-carbon energy system requires major investment in renewable electricity generation and the electricity grid infrastructure. Aligning household demand with the marginal costs of production and distribution requires traditional static electricity prices to be replaced by dynamic real-time prices, encouraging consumption during periods of low generation cost. Distribution grids face an additional constraint: the need to limit coincident peak demand. While real-time pricing and electrification may inadvertently increase peaks on local grids by encouraging consumption during periods of low generation cost, peak demand charges encourage a smoother consumption profile, mitigating local grid congestion. This paper analyzes these dual incentives using high-frequency consumption data from a large-scale natural experiment in Flanders. Our matched difference-in-differences estimates show that households adopting real-time pricing increase consumption peaks, especially during summer. Furthermore, the introduction of a peak demand charge mitigates peaks by reducing household peak demand by 1–3\% on average. Reductions are most pronounced among electric vehicle owners, who shift roughly 0.75 kWh per day from daytime to nighttime consumption, leading to peak reductions of up to 5\% (319 W). Importantly, we show that household-level effects of the peak demand charge scale to the level of the distribution grid, alleviating coincident grid-level peaks, particularly in circuits with high rates of electrification. In contrast, real-time pricing does not exhibit such grid-level effects. Our findings reveal a general tension in vertically structured markets where prices across stages of the supply chain can interact and cause cost externalitie