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The Economics of Energy (and Electricity) Demand

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  • Platchkov, L. M.
  • Pollitt, M. G.

Abstract

Economic drivers, technologies and demand side management are keys in understanding the long-term trends of both energy and more specifically electricity consumption. This paper discusses some of the important economics foundations of energy demand in general, and electricity in particular. First, we look at the macro-economic context of energy. This reveals how energy and electricity consumption are subject to the same drivers - income and price - over long periods. However, energy demand (and carbon emissions) falls and energy prices rises in one country may have little effect at the world level. Next, we examine the features of energy service expenditures. Despite similarities over time, specific sectors are distinct from one another in terms of consumption profiles, and new sources of electricity demand may substantially change total demand and the way it is consumed. This leads us to a closer look at the micro-economic context of energy demand, and the tension between technically possible energy savings one one side, and the economics and behavioural dimensions on the other side. We conclude by highlighting the various unknowns and uncertainties that characterise the future of energy demand.

Suggested Citation

  • Platchkov, L. M. & Pollitt, M. G., 2011. "The Economics of Energy (and Electricity) Demand," Cambridge Working Papers in Economics 1137, Faculty of Economics, University of Cambridge.
  • Handle: RePEc:cam:camdae:1137
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    File URL: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe1137.pdf
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    References listed on IDEAS

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    1. Brophy Haney, A. & Jones, I.W. & Pollitt, M.G., 2009. "UK Retailers and Climate Change: The Role of Partnership in Climate Strategies," Cambridge Working Papers in Economics 0950, Faculty of Economics, University of Cambridge.
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    Cited by:

    1. Santos, João & Domingos, Tiago & Sousa, Tânia & St. Aubyn, Miguel, 2016. "Does a small cost share reflect a negligible role for energy in economic production? Testing for aggregate production functions including capital, labor, and useful exergy through a cointegration-base," MPRA Paper 70850, University Library of Munich, Germany.
    2. Richard Green & Yacob Mulugetta & Zhong Xiang Zhang, 2014. "Sustainable energy policy," Chapters,in: Handbook of Sustainable Development, chapter 33, pages 532-550 Edward Elgar Publishing.
    3. Paul E. Brockway & Harry Saunders & Matthew K. Heun & Timothy J. Foxon & Julia K. Steinberger & John R. Barrett & Steve Sorrell, 2017. "Energy Rebound as a Potential Threat to a Low-Carbon Future: Findings from a New Exergy-Based National-Level Rebound Approach," Energies, MDPI, Open Access Journal, vol. 10(1), pages 1-24, January.
    4. Paul E. Brockway & Matthew K. Heun & João Santos & John R. Barrett, 2017. "Energy-Extended CES Aggregate Production: Current Aspects of Their Specification and Econometric Estimation," Energies, MDPI, Open Access Journal, vol. 10(2), pages 1-23, February.
    5. Wolfgang Buchholz & Jonas Frank & Hans-Dieter Karl & Johannes Pfeiffer & Karen Pittel & Ursula Triebswetter & Jochen Habermann & Wolfgang Mauch & Thomas Staudacher, 2012. "Die Zukunft der Energiemärkte: Ökonomische Analyse und Bewertung von Potenzialen und Handlungsmöglichkeiten," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 57, October.
    6. Chiara F. DEL BO & Massimo FLORIO, 2012. "Electricity investment: an evaluation of the new British energy policy and its implications for the European Union," Departmental Working Papers 2012-15, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    7. Musiliu 0. Oseni & Michael G. Poilitt & David M. Retner & Laura-Lucia Richter & Kong Chyong, 2013. "2013 EPRG Public Opinion Survey: Smart Energy Survey — Attitudes and Behaviours," Cambridge Working Papers in Economics 1352, Faculty of Economics, University of Cambridge.
    8. Platchkov, L. & Pollitt, M. G. & Reiner, D. & Shaorshadze, I., 2011. "2010 EPRG Public Opinion Survey: Policy Preferences and Energy Saving Measures," Cambridge Working Papers in Economics 1149, Faculty of Economics, University of Cambridge.

    More about this item

    Keywords

    Energy demand; electricity demand; macroeconomics of energy; energy services; energy prices; energy expenditures;

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • D19 - Microeconomics - - Household Behavior - - - Other

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