IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v43y2022i1p161-190.html

Understanding Hourly Electricity Demand: Implications for Load, Welfare and Emissions

Author

Listed:
  • Amin Karimu
  • Chandra Kiran B. Krishnamurthy
  • Mattias Vesterberg

Abstract

n this study, using hourly data from a representative sample of Swedish households on standard tariffs, we investigate the welfare and emission implications of moving to a mandatory dynamic pricing scheme. We allow demand during different hours of a day to affect utility differently, and account for the derived nature of electricity demand by explicitly accounting for the services (end-use demands) that drive hourly electricity demand. We use the flexible Exact Affine Stone Index (EASI) demand system, which accommodates both observed and unobserved heterogeneity in preferences, to understand changes in load consequent to hourly retail pricing. Our findings suggest that, following hourly retail pricing, changes in load patterns across hours are relatively small: total load changes by less than one percent. There are correspondingly small reductions in welfare and carbon emissions, of less than 0.2 percent and 0.47 percent, respectively. Overall, in the context of a decentralized, competitive retail electricity market-setting, our results suggest that the benefits to ensuring that the retail price of electricity reflects the hourly marginal cost is small, at least in the short run.

Suggested Citation

  • Amin Karimu & Chandra Kiran B. Krishnamurthy & Mattias Vesterberg, 2022. "Understanding Hourly Electricity Demand: Implications for Load, Welfare and Emissions," The Energy Journal, , vol. 43(1), pages 161-190, January.
    • Handle: RePEc:sae:enejou:v:43:y:2022:i:1:p:161-190
    DOI: 10.5547/01956574.43.1.akar
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.43.1.akar
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.43.1.akar?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. repec:aen:journl:2007v28-02-a06 is not listed on IDEAS
    2. Thomas Taylor & Peter Schwarz & James Cochell, 2005. "24/7 Hourly Response to Electricity Real-Time Pricing with up to Eight Summers of Experience," Journal of Regulatory Economics, Springer, vol. 27(3), pages 235-262, January.
    3. Mountain, Dean C & Lawson, Evelyn L, 1992. "A Disaggregated Nonhomothetic Modeling of Responsiveness to Residential Time-of-Use Electricity Rates," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 181-207, February.
    4. Broberg, Thomas & Persson, Lars, 2016. "Is our everyday comfort for sale? Preferences for demand management on the electricity market," Energy Economics, Elsevier, vol. 54(C), pages 24-32.
    5. James Cochell & Peter Schwarz & Thomas Taylor, 2012. "Using real-time electricity data to estimate response to time-of-use and flat rates: an application to emissions," Journal of Regulatory Economics, Springer, vol. 42(2), pages 135-158, October.
    6. C鳡r E. Castell & Tullaya Boonsaeng & Carlos E. Carpio, 2015. "Demand system estimation in the absence of price data: an application of Stone-Lewbel price indices," Applied Economics, Taylor & Francis Journals, vol. 47(6), pages 553-568, February.
    7. Graff Zivin, Joshua S. & Kotchen, Matthew J. & Mansur, Erin T., 2014. "Spatial and temporal heterogeneity of marginal emissions: Implications for electric cars and other electricity-shifting policies," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 248-268.
    8. repec:aen:journl:ej37-4-vesterberg is not listed on IDEAS
    9. repec:aen:journl:2006v27-04-a06 is not listed on IDEAS
    10. Ketterer, Janina C., 2014. "The impact of wind power generation on the electricity price in Germany," Energy Economics, Elsevier, vol. 44(C), pages 270-280.
    11. David L. Edgerton, 1997. "Weak Separability and the Estimation of Elasticities in Multistage Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 62-79.
    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. Gustafsson, Johan & Ma, Xiaofei & Maih, Junior & Vesterberg, Mattias, 2025. "Macroeconomic effects of fiscal policy under an energy supply shock," Energy Policy, Elsevier, vol. 203(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. Vesterberg, Mattias, 2017. "Power to the people: Electricity demand and household behavior," Umeå Economic Studies 942, Umeå University, Department of Economics.
    2. Cao, K.H. & Qi, H.S. & Tsai, C.H. & Woo, C.K. & Zarnikau, J., 2021. "Energy trading efficiency in the US Midcontinent electricity markets," Applied Energy, Elsevier, vol. 302(C).
    3. repec:aen:journl:ej36-4-bollino is not listed on IDEAS
    4. Simona Bigerna & Carlo Andrea Bollino, 2015. "A System of Hourly Demand in the Italian Electricity Market," The Energy Journal, , vol. 36(4), pages 129-148, October.
    5. Schaper, Julian & Franks, Max & Koch, Nicolas & Plinke, Charlotte & Sureth, Michael, 2025. "Corrigendum to ”On the emission and distributional effects of a CO2eq-tax on agricultural goods—The case of Germany” [Food Policy 130 (2025) 102794]," Food Policy, Elsevier, vol. 131(C).
    6. Daiya ISOGAWA & Hiroshi OHASHI & Tokunari ANAI, 2022. "Role of Advance Notice on High-priced Hours: Critical peak pricing on industrial demand," Discussion papers 22068, Research Institute of Economy, Trade and Industry (RIETI).
    7. David P. Brown & David E. M. Sappington, 2016. "On the optimal design of demand response policies," Journal of Regulatory Economics, Springer, vol. 49(3), pages 265-291, June.
    8. Tarek Atalla & Simona Bigerna & Carlo Andrea Bollino, 2018. "Energy demand elasticities and weather worldwide," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(1), pages 207-237, April.
    9. Brännlund, Runar & Vesterberg, Mattias, 2021. "Peak and off-peak demand for electricity: Is there a potential for load shifting?," Energy Economics, Elsevier, vol. 102(C).
    10. Sheldon, Tamara L. & Dua, Rubal, 2018. "Gasoline savings from clean vehicle adoption," Energy Policy, Elsevier, vol. 120(C), pages 418-424.
    11. de Chalendar, Jacques A. & Benson, Sally M., 2021. "A physics-informed data reconciliation framework for real-time electricity and emissions tracking," Applied Energy, Elsevier, vol. 304(C).
    12. F. Durante & A. Gatto & F. Ravazzolo, 2024. "Understanding relationships with the Aggregate Zonal Imbalance using copulas," Statistical Methods & Applications, Springer;Società Italiana di Statistica, vol. 33(2), pages 513-554, April.
    13. Angelica Gianfreda & Francesco Ravazzolo & Luca Rossini, 2023. "Large Time‐Varying Volatility Models for Hourly Electricity Prices," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(3), pages 545-573, June.
    14. Durmaz, Tunç, 2016. "Precautionary Storage in Electricity Markets," Discussion Papers 2016/5, Norwegian School of Economics, Department of Business and Management Science.
    15. Olukunle O. Owolabi & Kathryn Lawson & Sanhita Sengupta & Yingsi Huang & Lan Wang & Chaopeng Shen & Mila Getmansky Sherman & Deborah A. Sunter, 2022. "A Robust Statistical Analysis of the Role of Hydropower on the System Electricity Price and Price Volatility," Papers 2203.02089, arXiv.org.
    16. Marchetti, Isabella & Rego, Erik Eduardo, 2022. "The impact of hourly pricing for renewable generation projects in Brazil," Renewable Energy, Elsevier, vol. 189(C), pages 601-617.
    17. Aborisade, Olumide & Carpio, Carlos, 2017. "Household Demand for Meat in Nigeria," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252839, Southern Agricultural Economics Association.
    18. Billé, Anna Gloria & Gianfreda, Angelica & Del Grosso, Filippo & Ravazzolo, Francesco, 2023. "Forecasting electricity prices with expert, linear, and nonlinear models," International Journal of Forecasting, Elsevier, vol. 39(2), pages 570-586.
    19. Manuel Frondel & Stephan Sommer & Colin Vance, 2015. "The burden of Germanyùs energy transition: An empirical analysis of distributional effects," Economic Analysis and Policy, Elsevier, vol. 45(c), pages 89-99.
    20. Thao Pham & Killian Lemoine, 2020. "Impacts of subsidized renewable electricity generation on spot market prices in Germany : Evidence from a GARCH model with panel data," Working Papers hal-02568268, HAL.
    21. Kruyt, Bert & Lehning, Michael & Kahl, Annelen, 2017. "Potential contributions of wind power to a stable and highly renewable Swiss power supply," Applied Energy, Elsevier, vol. 192(C), pages 1-11.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    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:sae:enejou:v:43:y:2022:i:1:p:161-190. 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: SAGE Publications (email available below). General contact details of provider: .

    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.