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Interfuel Substitution within Industrial Companies: An Analysis Based on Panel Data at Company Level

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  • Thomas Bue Bjorner
  • Henrik Holm Jensen

Abstract

In this paper we estimate two models for interfuel substitution between electricity, district heating and (other) fuels using a micro panel data set containing information for most Danish industrial companies in the period between 1983 and 1997. The main finding of the study is that interfuel substitution is low within the companies, especially between electricity and other fuels. The partial own-price elasticities estimated are small (between -0.04 and -0.13) both for electricity and other fuels, while it is between -0.44 and -0.50 for district heating. The partial own-price elasticity for electricity is smaller than generally found in macro studies. One explanation may be that the macro studies, in addition to technical substitution, capture some derived demand effect (i.e., aggregation bias).

Suggested Citation

  • Thomas Bue Bjorner & Henrik Holm Jensen, 2002. "Interfuel Substitution within Industrial Companies: An Analysis Based on Panel Data at Company Level," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 27-50.
    • Handle: RePEc:aen:journl:2002v23-02-a02
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    Cited by:

    1. Bjerregaard, Casper & Møller, Niels Framroze, 2022. "The influence of electricity prices on saving electricity in production: Automated multivariate time-series analyses for 99 Danish trades and industries," Energy Economics, Elsevier, vol. 107(C).
    2. Tan, Xiujie & Wang, Banban & Wei, Jie & Taghizadeh-Hesary, Farhad, 2023. "The role of carbon pricing in achieving energy transition in the Post-COP26 era: Evidence from China's industrial energy conservation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 182(C).
    3. Raul Jimenez & Ariel Yépez-García, 2016. "Composition and Sensitivity of Residential Energy Consumption," IDB Publications (Working Papers) 95257, Inter-American Development Bank.
    4. Rentschler, Jun & Kornejew, Martin & Bazilian, Morgan, 2017. "Fossil fuel subsidy reforms and their impacts on firms," Energy Policy, Elsevier, vol. 108(C), pages 617-623.
    5. Raja Chakir & Alain Bousquet & Norbert Ladoux, 2004. "Modeling corner solutions with panel data: Application to the industrial energy demand in France," Empirical Economics, Springer, vol. 29(1), pages 193-208, January.
    6. Jevgenijs Steinbuks, 2012. "Interfuel Substitution and Energy Use in the U.K. Manufacturing Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    7. Lijesen, Mark G., 2007. "The real-time price elasticity of electricity," Energy Economics, Elsevier, vol. 29(2), pages 249-258, March.
    8. Steinbuks, Jevgenijs & Neuhoff, Karsten, 2014. "Assessing energy price induced improvements in efficiency of capital in OECD manufacturing industries," Journal of Environmental Economics and Management, Elsevier, vol. 68(2), pages 340-356.
    9. Galetovic, Alexander & Muñoz, Cristián M., 2011. "Regulated electricity retailing in Chile," Energy Policy, Elsevier, vol. 39(10), pages 6453-6465, October.
    10. Bousquet, Alain & Ladoux, Norbert, 2006. "Flexible versus designated technologies and interfuel substitution," Energy Economics, Elsevier, vol. 28(4), pages 426-443, July.
    11. Raja Chakir & Alban Thomas, 2003. "Simulated maximum likelihood estimation of demand systems with corner solutions and panel data application to industrial energy demand," Revue d'économie politique, Dalloz, vol. 113(6), pages 773-799.
    12. Pachauri, Shonali & Jiang, Leiwen, 2008. "The household energy transition in India and China," Energy Policy, Elsevier, vol. 36(11), pages 4022-4035, November.
    13. Arnberg, Soren & Bjorner, Thomas Bue, 2007. "Substitution between energy, capital and labour within industrial companies: A micro panel data analysis," Resource and Energy Economics, Elsevier, vol. 29(2), pages 122-136, May.
    14. KITAMURA Toshihiko & MANAGI Shunsuke, 2016. "Substitution between Purchased Electricity and Fuel for Onsite Power Generation in the Manufacturing Industry: Plant level analysis in Japan," Discussion papers 16007, Research Institute of Economy, Trade and Industry (RIETI).
    15. Patricia Iyore Ajayi, 2018. "Urban Household Energy Demand in Southwest Nigeria," African Development Review, African Development Bank, vol. 30(4), pages 410-422, December.

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    JEL classification:

    • F0 - International Economics - - General

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