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Switching on Electricity Demand Response: Evidence for German Households

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  • Manuel Frondel and Gerhard Kussel

Abstract

Empirical evidence on households' awareness of electricity prices and potentially divergent demand responses to price changes conditional on price knowledge is scant. Using panel data originating from Germany's Residential Energy Consumption Survey (GRECS), we fill this void by employing an instrumental-variable (IV) approach to cope with the endogeneity of the consumers'tariff choice. By additionally exploiting information on the households'knowledge about power prices, we combine the IV approach with an Endogenous Switching Regression Model to estimate price elasticities for two groups of households, finding that only those households that are informed about prices are sensitive to price changes, whereas the electricity demand of uninformed households is entirely price-inelastic. Based on these results, to curb the electricity consumption of the household sector and its environmental impact, we suggest implementing low-cost information measures on a large scale, such as improving the transparency of tariffs, thereby increasing the saliency of prices.

Suggested Citation

  • Manuel Frondel and Gerhard Kussel, 2019. "Switching on Electricity Demand Response: Evidence for German Households," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    • Handle: RePEc:aen:journl:ej40-5-frondel
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    1. Clastres, Cédric & Khalfallah, Haikel, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Energy Economics, Elsevier, vol. 98(C).
    2. Gechert, Sebastian & Mey, Bianka & Prante, Franz & Schäfer, Teresa, 2025. "The Price Elasticity of Heating and Cooling Energy Demand," OSF Preprints 4sjy5_v2, Center for Open Science.
    3. Schleich, Joachim & Hillenbrand, Thomas, 2019. "Water demand responds asymmetrically to rising and falling prices," Working Papers "Sustainability and Innovation" S03/2019, Fraunhofer Institute for Systems and Innovation Research (ISI).
    4. Frondel, Manuel & Sommer, Stephan & Vance, Colin, 2019. "Heterogeneity in German Residential Electricity Consumption: A quantile regression approach," Energy Policy, Elsevier, vol. 131(C), pages 370-379.
    5. Boogen, Nina & Datta, Souvik & Filippini, Massimo, 2021. "Estimating residential electricity demand: New empirical evidence," Energy Policy, Elsevier, vol. 158(C).
    6. Frondel, Manuel & Kaestner, Kathrin & Sommer, Stephan & Vance, Colin, 2022. "Photovoltaics and the solar rebound: Evidence for Germany," Ruhr Economic Papers 954, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Elke D. Groh & Andreas Ziegler, 2021. "On the relevance of values, norms, and economic preferences for electricity consumption," MAGKS Papers on Economics 202107, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    8. Andreas Gerster & Manuel Frondel & Kathrin Kaestner & Michael Pahle & Puja Singhal, 2025. "Premium Programs for Energy Conservation: Evidence from a Randomized Controlled Experiment," Working Papers 2504, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    9. Frondel, Manuel & Kaestner, Kathrin & Sommer, Stephan & Vance, Colin, 2021. "Photovoltaics and the Solar Rebound: Evidence for Germany," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242356, Verein für Socialpolitik / German Economic Association.
    10. Groh, Elke D. & Ziegler, Andreas, 2022. "On the relevance of values, norms, and economic preferences for electricity consumption," Ecological Economics, Elsevier, vol. 192(C).
    11. Johannes Huber & Christian Scharrer, 2024. "The fiscal and intergenerational burdens of brakes and subsidies for energy prices," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(5), pages 1249-1273, October.
    12. Joachim Schleich & Thomas Hillenbrand, 2019. "Residential water demand responds asymmetrically to rising and falling prices," Applied Economics, Taylor & Francis Journals, vol. 51(45), pages 4973-4981, September.
    13. Tomasz Rokicki & Piotr Bórawski & Barbara Gradziuk & Piotr Gradziuk & Aldona Mrówczyńska-Kamińska & Joanna Kozak & Danuta Jolanta Guzal-Dec & Kamil Wojtczuk, 2021. "Differentiation and Changes of Household Electricity Prices in EU Countries," Energies, MDPI, vol. 14(21), pages 1-21, October.
    14. Fabra, Natalia, 2021. "The energy transition: An industrial economics perspective," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    15. Groh, Elke D. & Ziegler, Andreas, 2020. "On the relevance of economic preferences, values, norms, and socio-demographics for electricity consumption," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224587, Verein für Socialpolitik / German Economic Association.
    16. Huang, Charlotte & Elsland, Rainer, 2019. "A survey-based approach to estimate residential electricity consumption at municipal level in Germany," Working Papers "Sustainability and Innovation" S10/2019, Fraunhofer Institute for Systems and Innovation Research (ISI).
    17. Lin, Hongyang & Jia, Huanyu & Ye, Yingjin & Shen, Yu & Lin, Boqiang, 2024. "Is cognition of residential tiered pricing policy effective in reducing electricity consumption in China?," Utilities Policy, Elsevier, vol. 90(C).
    18. Lin, Boqiang & Zhu, Penghu, 2021. "Has increasing block pricing policy been perceived in China? Evidence from residential electricity use," Energy Economics, Elsevier, vol. 94(C).
    19. Frondel Manuel & Niehues Delia A. & Sommer Stephan, 2021. "Wasserverbrauch privater Haushalte in Deutschland: Eine empirische Mikroanalyse," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 70(3), pages 230-254, December.
    20. Gholipour, Hassan F. & Arjomandi, Amir & Yam, Sharon, 2022. "Green property finance and CO2 emissions in the building industry," Global Finance Journal, Elsevier, vol. 51(C).
    21. Frondel, Manuel & Kussel, Gerhard & Sommer, Stephan, 2019. "Heterogeneity in the price response of residential electricity demand: A dynamic approach for Germany," Resource and Energy Economics, Elsevier, vol. 57(C), pages 119-134.
    22. Cédric Clastres & Haikel Khalfallah, 2021. "Dynamic pricing efficiency with strategic retailers and consumers: An analytical analysis of short-term market interactions," Post-Print hal-03193212, HAL.
    23. Cédric Clastres & Haikel Khalfallah, 2020. "Retailers' strategies facing demand response and markets interactions," Working Papers hal-03167543, HAL.
    24. Bert Willems & Juulia Zhou, 2020. "The Clean Energy Package and Demand Response: Setting Correct Incentives," Energies, MDPI, vol. 13(21), pages 1-19, October.

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    JEL classification:

    • F0 - International Economics - - General

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