Structural Breaks, Price and Income Elasticity, and Forecast of the Monthly Italian Electricity Demand
AbstractInsights about electricity demand dynamics is fundamental for investment capacity, optimal energy policies, and a balanced electricity system. This paper presents an empirical analysis of the monthly Italian electricity demand since January 2001 to June 2012. In the first section we conduct the analysis of structural breaks in the electricity demand finding that the series has two structural breaks in August 2002 and August 2004 as market liberalization effects on consumption. In the second part of the paper we estimate demand price elasticities both for residential and industrial sector. As expected from the electricity economics literature concerning elasticities estimates, we find that the long run price and income elasticities are more price elastic than the short run both in industrial and residential consumption. In the third and last section, we compare two different forecasting models: the Hidden Markov Models (HMM) and the Holt Winters (H-W) seasonal smoothing method. Considering the Mean Absolute Percentage Error (MAPE), the HMM approach seems to show a superiority in forecasting the monthly electricity demand compared to the H-W methodology.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 47653.
Date of creation: 14 Jun 2013
Date of revision:
Electricity Demand; Price and Income Elasticity; Hidden Markov Models; Holt-Winters Seasonal Filter Smoothing;
Find related papers by JEL classification:
- C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-24 (All new papers)
- NEP-ENE-2013-06-24 (Energy Economics)
- NEP-FOR-2013-06-24 (Forecasting)
- NEP-REG-2013-06-24 (Regulation)
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