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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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    References listed on IDEAS

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    1. Aoife Brophy Haney & Ian W. Jones & Michael G. Pollitt, 2009. "UK retailers and climate change: The role of partnership in climate strategies," Working Papers EPRG 0928, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
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    1. Nnaemeka Vincent Emodi & Taha Chaiechi & ABM Rabiul Alam Beg, 2018. "The impact of climate change on electricity demand in Australia," Energy & Environment, , vol. 29(7), pages 1263-1297, November.
    2. 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-based method," MPRA Paper 70850, University Library of Munich, Germany.
    3. 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.
    4. 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.
    5. Richard Green & Yacob Mulugetta & Zhong Xiang Zhang, 2014. "Sustainable energy policy," Chapters, in: Giles Atkinson & Simon Dietz & Eric Neumayer & Matthew Agarwala (ed.), Handbook of Sustainable Development, chapter 33, pages 532-550, Edward Elgar Publishing.
    6. Santos, João & Sousa, Tânia & Serrenho, André & Domingos, Tiago, 2025. "An aggregate price for energy services: Useful exergy as an intermediate flow in a two-sector model of the economy," Ecological Economics, Elsevier, vol. 236(C).
    7. 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, vol. 10(1), pages 1-24, January.
    8. Laura Platchkov & Michael G. Pollitt & David Reiner & Irina Shaorshadze, 2011. "2010 EPRG Public Opinion Survey: Policy Preferences and Energy Saving Measures," Working Papers EPRG 1122, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    9. Santos, João & Domingos, Tiago & Sousa, Tânia & St. Aubyn, Miguel, 2018. "Useful Exergy Is Key in Obtaining Plausible Aggregate Production Functions and Recognizing the Role of Energy in Economic Growth: Portugal 1960–2009," Ecological Economics, Elsevier, vol. 148(C), pages 103-120.
    10. Jackson, Andrew & Jackson, Tim, 2025. "Macroeconomic, sectoral and financial dynamics in energy transitions: A stock-flow consistent, input-output approach," Ecological Economics, Elsevier, vol. 230(C).
    11. 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, vol. 10(2), pages 1-23, February.
    12. Patrick Schembri & Hynd Remita, 2021. "Énergies « nouvelles » et société," Post-Print hal-03394500, HAL.
    13. Penelope Buckley, 2021. "A Systematic Review of Qualitative Studies on Residential Consumer Experience with Smart Meters and Dynamic Pricing," Post-Print hal-03335199, HAL.
    14. Pradhan, Ashis Kumar & Rout, Sandhyarani & Khan, Imran Ahmed, 2021. "Does market concentration affect wholesale electricity prices? An analysis of the Indian electricity sector in the COVID-19 pandemic context," Utilities Policy, Elsevier, vol. 73(C).
    15. 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.
    16. Baum, Zvi & Palatnik, Ruslana Rachel & Ayalon, Ofira & Elmakis, David & Frant, Shimon, 2019. "Harnessing households to mitigate renewables intermittency in the smart grid," Renewable Energy, Elsevier, vol. 132(C), pages 1216-1229.
    17. Vinny Motjoadi & Pitshou N. Bokoro & Moses O. Onibonoje, 2020. "A Review of Microgrid-Based Approach to Rural Electrification in South Africa: Architecture and Policy Framework," Energies, MDPI, vol. 13(9), pages 1-22, May.
    18. João Gonçalves & João Santos & Matthew Heun & Paul E. Brockway & Tiago Domingos, 2024. "Useful Exergy as an Intermediate Input in a Two-Sector Model of the United States Economy," Energies, MDPI, vol. 17(6), pages 1-32, March.

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    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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