Real-Time Pricing in the Swedish Electricity Market

Abstract: An introduction of real-time prices of electricity, i.e. prices that correspond to the hourly spot market price, for residential consumers in Sweden has recently been suggested. Support for real-time pricing comes from governmental agencies as well as commercial interests, however without a good understanding of how a shift to real-time prices would affect prices and volumes in the market, and what welfare effects these changes would induce. This thesis addresses these issues by developing a model of the Swedish electricity market. The conclusion is that an introduction of real-time pricing would have a smoothing effect on prices and volumes, which in turn is likely to have positive welfare effects on producers and on the consumers that shift, but a negative effect on the larger consumers that already pay by the hour. The net welfare effect is likely to be positive.