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Short- and Long-Run Electricity Demand Elasticities at the Subsectoral Level: A Cointegration Analysis for German Manufacturing Industries

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Author Info

  • Bernstein, Ronald

    ()
    (E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University)

  • Madlener, Reinhard

    ()
    (E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University)

Abstract

In this paper we use multivariate cointegration analysis to estimate electricity demand elasticities at the subsectoral industry level. This enables us to reap the benefits of lower heterogeneity within the electricity-consuming sectors investigated and of retaining additional information otherwise blurred by aggregation. The annual data set used covers eight subsectors of the German economy for the period 1970-2007. By employing a cointegrated VAR model specification and accounting for structural breaks we find cointegration relationships for five of the eight subsectors studied. The long-run elasticities range between 0.70 and 1.90 for economic activity and between –0.52 and zero for the price of electricity. The short-run elasticities are estimated by single-equation error-correction modeling and found to be between 0.17 to 1.02 for economic activity and –0.57 to zero for electricity price. Granger-causality tests indicate that in the long term causality runs from both economic activity and electricity price to electricity consumption, while Granger-causality from electricity price and electricity consumption to economic activity is detected in only two subsectors. Electricity price is found to be Granger-caused neither in the long nor the short run. Finally, an impulse response analysis yields plausible results confirming the usefulness of the approach adopted.

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Bibliographic Info

Paper provided by E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN) in its series FCN Working Papers with number 19/2010.

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Length: 26 pages
Date of creation: Nov 2010
Date of revision:
Handle: RePEc:ris:fcnwpa:2010_019

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Web page: http://www.eonerc.rwth-aachen.de/fcn
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Keywords: Disaggregated data; Elasticities; Cointegration; VECM; Granger-causality; Impulse responses; Structural breaks; Germany;

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Cited by:
  1. Michelsen, Carl Christian & Madlener, Reinhard, 2011. "Homeowners' Motivation to Adopt a Residential Heating System: A Principal-Component Analysis," FCN Working Papers 17/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Jan 2013.
  2. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "The Impact of Green Framing on Consumers’ Valuations of Energy-Saving Measures," FCN Working Papers 7/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  3. Hackbarth, André & Madlener, Reinhard, 2011. "Consumer Preferences for Alternative Fuel Vehicles: A Discrete Choice Analysis," FCN Working Papers 20/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  4. Yoosoon Chang & Chang Sik Kim & J. Isaac Miller & Joon Y. Park & Sungkeun Park, 2014. "Time-varying Long-run Income and Output Elasticities of Electricity Demand," Working Papers 1409, Department of Economics, University of Missouri.
  5. Achtnicht, Martin & Madlener, Reinhard, 2014. "Factors influencing German house owners' preferences on energy retrofits," Energy Policy, Elsevier, vol. 68(C), pages 254-263.
  6. Palmer, Johannes & Sorda, Giovanni & Madlener, Reinhard, 2013. "Modeling the Diffusion of Residential Photovoltaic Systems in Italy: An Agent-based Simulation," FCN Working Papers 9/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  7. Rohlfs, Wilko & Madlener, Reinhard, 2012. "Assessment of Clean-Coal Strategies: The Questionable Merits of Carbon Capture-Readiness," FCN Working Papers 18/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  8. Rohlfs, Wilko & Madlener, Reinhard, 2011. "Multi-Commodity Real Options Analysis of Power Plant Investments: Discounting Endogenous Risk Structures," FCN Working Papers 22/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  9. Bruns, Stephan B. & Gross, Christian, 2013. "What if Energy Time Series are not Independent? Implications for Energy-GDP Causality Analysis," FCN Working Papers 10/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  10. Michelsen, Carl Christian & Madlener, Reinhard, 2011. "Homeowners' Preferences for Adopting Residential Heating Systems: A Discrete Choice Analysis for Germany," FCN Working Papers 9/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  11. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Challenges in the Evaluation of Ultra-Long-Lived Projects: Risk Premia for Projects with Eternal Returns or Costs," FCN Working Papers 13/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  12. Harmsen - van Hout, Marjolein & Ghosh, Gaurav & Madlener, Reinhard, 2013. "An Evaluation of Attribute Anchoring Bias in a Choice Experimental Setting," FCN Working Papers 6/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  13. Sorda, Giovanni & Madlener, Reinhard, 2012. "Cost-Effectiveness of Lignocellulose Biorefineries and their Impact on the Deciduous Wood Markets in Germany," FCN Working Papers 8/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  14. Kraas, Birk & Schroedter-Homscheidt, Marion & Pulvermüller, Benedikt & Madlener, Reinhard, 2011. "Economic Assessment of a Concentrating Solar Power Forecasting System for Participation in the Spanish Electricity Market," FCN Working Papers 12/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  15. Dergiades, Theologos & Madlener, Reinhard & Christofidou, Georgia, 2012. "The Nexus between Natural Gas Spot and Futures Prices at NYMEX: Do Weather Shocks and Non-Linear Causality in Low Frequencies Matter?," FCN Working Papers 17/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised Sep 2013.
  16. Bernstein, Ronald & Madlener, Reinhard, 2011. "Responsiveness of Residential Electricity Demand in OECD Countries: A Panel Cointegation and Causality Analysis," FCN Working Papers 8/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  17. Michelsen , Carl Christian & Madlener, Reinhard, 2013. "Switching from Fossil Fuel to Renewables in Residential Heating Systems: An Empirical Study of Homeowners’ Decisions in Germany," FCN Working Papers 14/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  18. Rohlfs, Wilko & Madlener, Reinhard, 2013. "Optimal Power Generation Investment: Impact of Technology Choices and Existing Portfolios for Deploying Low-Carbon Coal Technologies," FCN Working Papers 12/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  19. Ghosh, Gaurav & Shortle, James, 2012. "Managing Pollution Risk through Emissions Trading," FCN Working Papers 1/2012, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
  20. Hackbarth, André & Madlener, Reinhard, 2013. "Willingness-to-Pay for Alternative Fuel Vehicle Characteristics: A Stated Choice Study for Germany," FCN Working Papers 20/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

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