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Going beyond tradition: Estimating residential electricity demand using an appliance index and energy services

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Abstract

In this paper we estimate the long- and short-run price elasticities of residential electricity consumption in Switzerland from a household survey by constructing an index of the stock of household appliances as well as by using energy services. We create the index by aggregating the information on the major household appliances. The index is used to estimate the impact of appliances on residential electricity demand. Furthermore, we also use energy services to estimate the electricity demand. We adopt an instrumental variables approach to obtain consistent estimates of the price elasticity to account for potential endogeneity concerns with the average price as well as the appliance index. Our results suggest that the price elasticity is around -0.6. We conclude that Swiss households are price inelastic in electricity prices. This can be used for policy makers as well as by utility companies to design pricing instruments to modify electricity consumption. We also find that estimates of the electricity demand when we substitute the usual residential characteristics with energy services are quite comparable.

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  • Nina Boogen & Souvik Datta & Massimo Filippini, 2014. "Going beyond tradition: Estimating residential electricity demand using an appliance index and energy services," CER-ETH Economics working paper series 14/200, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:14-200
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    Cited by:

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    2. Benjamin Volland & Ivan Tilov, 2018. "Price elasticities of electricity demand in Switzerland: Results from a household panel," IRENE Working Papers 18-03, IRENE Institute of Economic Research.
    3. Jimenez Mori, Raul, 2021. "It’s not price; It’s quality. Satisfaction and price fairness perception," World Development, Elsevier, vol. 139(C).
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    5. Boogen, Nina & Datta, Souvik & Filippini, Massimo, 2021. "Estimating residential electricity demand: New empirical evidence," Energy Policy, Elsevier, vol. 158(C).
    6. Mark Miller & Anna Alberini, 2015. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," CER-ETH Economics working paper series 15/223, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    7. Prasanna, Ashreeta & Mahmoodi, Jasmin & Brosch, Tobias & Patel, Martin K., 2018. "Recent experiences with tariffs for saving electricity in households," Energy Policy, Elsevier, vol. 115(C), pages 514-522.
    8. Zhang, Jun, 2016. "Carbon Tax Incidence and Household Energy Demand in the U.S," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235569, Agricultural and Applied Economics Association.
    9. Jerzy Andruszkiewicz & Józef Lorenc & Agnieszka Weychan, 2019. "Demand Price Elasticity of Residential Electricity Consumers with Zonal Tariff Settlement Based on Their Load Profiles," Energies, MDPI, vol. 12(22), pages 1-22, November.
    10. Feger, Fabian & Radulescu, Doina, 2020. "When environmental and redistribution concerns collide: The case of electricity pricing," Energy Economics, Elsevier, vol. 90(C).
    11. Agrawal, Shalu & Harish, S.P. & Mahajan, Aseem & Thomas, Daniel & Urpelainen, Johannes, 2020. "Influence of improved supply on household electricity consumption - Evidence from rural India," Energy, Elsevier, vol. 211(C).
    12. Tilov, Ivan & Farsi, Mehdi & Volland, Benjamin, 2020. "From frugal Jane to wasteful John: A quantile regression analysis of Swiss households’ electricity demand," Energy Policy, Elsevier, vol. 138(C).
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    14. Miller, Mark & Alberini, Anna, 2016. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," Energy Policy, Elsevier, vol. 97(C), pages 235-249.

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    More about this item

    Keywords

    Residential electricity; appliance stock index; energy services; instrumental variables;
    All these keywords.

    JEL classification:

    • D - Microeconomics
    • D1 - Microeconomics - - Household Behavior
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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