IDEAS home Printed from https://ideas.repec.org/p/irn/wpaper/18-03.html
   My bibliography  Save this paper

Price elasticities of electricity demand in Switzerland: Results from a household panel

Author

Listed:
  • Benjamin Volland
  • Ivan Tilov

Abstract

In this paper, we use data from a new household-level panel survey to estimate short- and long-run price elasticities of residential electricity demand in Switzerland. We exploit Switzerland's unique local variation in topography-related grid maintenance costs and electricity taxation, to address endogeneity of average prices in our models. Using first difference and gradual adjustment models, we find short-run elasticities of -0.3 and long-run elasticities in excess of negative unity. Results thus suggest that a tax on electricity, as initially foreseen as a part of Switzerland's Energy Strategy 2050, is likely to have a moderate effect in the short run, but an important one in the long run.

Suggested Citation

  • 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.
    • Handle: RePEc:irn:wpaper:18-03
    as

    Download full text from publisher

    File URL: https://www5.unine.ch/RePEc/ftp/irn/pdfs/WP18-03.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Blasch, Julia & Boogen, Nina & Filippini, Massimo & Kumar, Nilkanth, 2017. "Explaining electricity demand and the role of energy and investment literacy on end-use efficiency of Swiss households," Energy Economics, Elsevier, vol. 68(S1), pages 89-102.
    2. David L. Ryan & Yu Wang & Andre Plourde, 1996. "Asymmetric Price Responses of Residential Energy Demand in Ontario," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 317-323, April.
    3. Filippini, Massimo, 1995. "Swiss residential demand for electricity by time-of-use," Resource and Energy Economics, Elsevier, vol. 17(3), pages 281-290, November.
    4. Bente Halvorsen & Bodil M. Larsen, 2013. "How serious is the aggregation problem? An empirical illustration," Applied Economics, Taylor & Francis Journals, vol. 45(26), pages 3786-3794, September.
    5. James M. Griffin & Craig T. Schulman, 2005. "Price Asymmetry in Energy Demand Models: A Proxy for Energy-Saving Technical Change?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 1-22.
    6. Jelke Bethlehem, 2010. "Selection Bias in Web Surveys," International Statistical Review, International Statistical Institute, vol. 78(2), pages 161-188, August.
    7. Massimo, Filippini, 2011. "Short- and long-run time-of-use price elasticities in Swiss residential electricity demand," Energy Policy, Elsevier, vol. 39(10), pages 5811-5817, October.
    8. Massimo Filippini, 1995. "Swiss Residential Demand for Electricity by Time-of-Use: An Application of the Almost Ideal Demand System," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 27-40.
    9. 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.
    10. Sapci, Onur & Considine, Timothy, 2014. "The link between environmental attitudes and energy consumption behavior," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 52(C), pages 29-34.
    11. Plümper, Thomas & Troeger, Vera E., 2007. "Efficient Estimation of Time-Invariant and Rarely Changing Variables in Finite Sample Panel Analyses with Unit Fixed Effects," Political Analysis, Cambridge University Press, vol. 15(2), pages 124-139, April.
    12. Espey, James A. & Espey, Molly, 2004. "Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(1), pages 1-17, April.
    13. Massimo Filippini, 1999. "Swiss residential demand for electricity," Applied Economics Letters, Taylor & Francis Journals, vol. 6(8), pages 533-538.
    14. Beck, Nathaniel & Katz, Jonathan N., 2001. "Throwing Out the Baby with the Bath Water: A Comment on Green, Kim, and Yoon," International Organization, Cambridge University Press, vol. 55(2), pages 487-495, April.
    15. van den Bergh, Jeroen C.J.M., 2008. "Environmental regulation of households: An empirical review of economic and psychological factors," Ecological Economics, Elsevier, vol. 66(4), pages 559-574, July.
    16. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    17. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
    18. Brounen, Dirk & Kok, Nils & Quigley, John M., 2013. "Energy literacy, awareness, and conservation behavior of residential households," Energy Economics, Elsevier, vol. 38(C), pages 42-50.
    19. Shin, Jeong-Shik, 1985. "Perception of Price When Price Information Is Costly: Evidence from Residential Electricity Demand," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 591-598, November.
    20. Haas, Reinhard & Schipper, Lee, 1998. "Residential energy demand in OECD-countries and the role of irreversible efficiency improvements," Energy Economics, Elsevier, vol. 20(4), pages 421-442, September.
    21. Peter C. Reiss & Matthew W. White, 2005. "Household Electricity Demand, Revisited," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 72(3), pages 853-883.
    22. DeWaters, Jan E. & Powers, Susan E., 2011. "Energy literacy of secondary students in New York State (USA): A measure of knowledge, affect, and behavior," Energy Policy, Elsevier, vol. 39(3), pages 1699-1710, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Devkota, Laxmi P. & Bhattarai, Utsav & Khatri, Pawan & Marahatta, Suresh & Shrestha, Dibesh, 2022. "Resilience of hydropower plants to flow variation through the concept of flow elasticity of power: Theoretical development," Renewable Energy, Elsevier, vol. 184(C), pages 920-932.
    2. Andruszkiewicz, Jerzy & Lorenc, Józef & Weychan, Agnieszka, 2020. "Seasonal variability of price elasticity of demand of households using zonal tariffs and its impact on hourly load of the power system," Energy, Elsevier, vol. 196(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Alberini, Anna & Filippini, Massimo, 2011. "Response of residential electricity demand to price: The effect of measurement error," Energy Economics, Elsevier, vol. 33(5), pages 889-895, September.
    3. 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.
    4. 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).
    5. Jens Ewald & Thomas Sterner & Eoin Ó Broin & Érika Mata, 2021. "Saving energy in residential buildings: the role of energy pricing," Climatic Change, Springer, vol. 167(1), pages 1-20, July.
    6. Boogen, Nina & Datta, Souvik & Filippini, Massimo, 2021. "Estimating residential electricity demand: New empirical evidence," Energy Policy, Elsevier, vol. 158(C).
    7. Cappers, Peter A. & Todd-Blick, Annika, 2021. "Heterogeneity in own-price residential customer demand elasticities for electricity under time-of-use rates: Evidence from a randomized-control trial in the United States," Utilities Policy, Elsevier, vol. 73(C).
    8. Torriti, Jacopo, 2013. "The significance of occupancy steadiness in residential consumer response to Time-of-Use pricing: Evidence from a stochastic adjustment model," Utilities Policy, Elsevier, vol. 27(C), pages 49-56.
    9. Dicembrino, Claudio & Trovato, Giovanni, 2013. "Structural Breaks, Price and Income Elasticity, and Forecast of the Monthly Italian Electricity Demand," MPRA Paper 47653, University Library of Munich, Germany.
    10. Thomas M. Fullerton & Ericka C. M ndez-Carrillo & Adam G. Walke, 2014. "Electricity Demand in a Northern Mexico Metropolitan Economy," International Journal of Energy Economics and Policy, Econjournals, vol. 4(4), pages 495-505.
    11. Blázquez, Leticia & Boogen, Nina & Filippini, Massimo, 2013. "Residential electricity demand in Spain: New empirical evidence using aggregate data," Energy Economics, Elsevier, vol. 36(C), pages 648-657.
    12. Ciarreta, Aitor & Espinosa, Maria Paz & Pizarro-Irizar, Cristina, 2023. "Pricing policies for efficient demand side management in liberalized electricity markets," Economic Modelling, Elsevier, vol. 121(C).
    13. Blazquez Leticia & Nina Boogen & Massimo Filippini, 2012. "Residential electricity demand for Spain: new empirical evidence using aggregated data," CEPE Working paper series 12-82, CEPE Center for Energy Policy and Economics, ETH Zurich.
    14. Hendrik Schmitz & Reinhard Madlener, 2020. "Heterogeneity in price responsiveness for residential space heating in Germany," Empirical Economics, Springer, vol. 59(5), pages 2255-2281, November.
    15. Asmare, Fissha & Giedraitis, Vincentas & Jaraitė, Jūratė & Kažukauskas, Andrius, 2023. "Energy-related financial literacy and retrofits of Soviet-era apartment buildings: The case of Lithuania," Energy Economics, Elsevier, vol. 120(C).
    16. Fell, Harrison & Li, Shanjun & Paul, Anthony, 2014. "A new look at residential electricity demand using household expenditure data," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 37-47.
    17. Kiran B Krishnamurthy, Chandra & Kriström, Bengt, 2013. "A cross-country analysis of residential electricity demand in 11 OECD-countries," CERE Working Papers 2013:5, CERE - the Center for Environmental and Resource Economics, revised 30 Jun 2014.
    18. 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.
    19. Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011. "Residential consumption of gas and electricity in the U.S.: The role of prices and income," Energy Economics, Elsevier, vol. 33(5), pages 870-881, September.
    20. Kussel, Gerhard & Frondel, Manuel, 2016. "Switching Response to Power Prices: Evidence from German Households," VfS Annual Conference 2016 (Augsburg): Demographic Change 145728, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Residential electricity demand; price elasticity; panel data; Switzerland;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:irn:wpaper:18-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Siwar Khelifa (email available below). General contact details of provider: https://edirc.repec.org/data/irenech.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.