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On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia

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  • Barrientos, Jorge

    ()

  • Velilla, Esteban

    ()

  • Tobón Orozco, David

    ()

  • Villada, Fernando

    ()

  • López Lezama, Jesús M.

    ()

Abstract

Abstract: This paper presents an estimation of the reaction of electricity demand to changes in price levels of forward contracts in the manufacturing industry of Colombia. To that end, a structural vector autoregressive (SVAR) model was developed, considering several economic activities at different voltage levels. The industrial sectors under study showed an electricity demand not significantly sensitive to price variations. However, the food and drink sectors, plastic and rubber manufacturing, as well as retail trade turned out to be more sensitive to price shocks than the chemical industry or textile manufacturing. Such inelasticity could be softened if information concerning prices and quantity demanded were of common knowledge, or if the forward curve were observable. Resumen En este artículo se presenta una estimación de la reacción de la demanda a niveles de precios de contratos forward de electricidad en la industria manufacturera de Colombia. Se desarrolló un modelo de vectores autorregresivos estructurales (SVAR) considerando varias actividades económicas a diferentes niveles de tensión. Los sectores industriales bajo estudio no mostraron una demanda de electricidad significativamente sensible a variaciones de precios. Sin embargo, los sectores de alimentos y bebidas, caucho y plástico, así como el sector comercial minorista resultaron ser más sensibles a choques de precios que la industria química o el sector de manufactura de textiles. Dicha inelasticidad podría suavizarse si la información concerniente a precios y cantidades demandadas fuera de conocimiento común, o si la curva forward pudiera ser observable.

Suggested Citation

  • Barrientos, Jorge & Velilla, Esteban & Tobón Orozco, David & Villada, Fernando & López Lezama, Jesús M., 2018. "On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia," Borradores del CIE 016025, Universidad de Antioquia - CIE.
  • Handle: RePEc:col:000099:016025
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    References listed on IDEAS

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    1. repec:bec:imsber:v:11:y:2019:i:1:p:55-82 is not listed on IDEAS
    2. repec:col:000093:016994 is not listed on IDEAS
    3. repec:col:000093:016978 is not listed on IDEAS

    More about this item

    Keywords

    mercados de electricidad; contratos forward; elasticidad precio de la demanda; modelos SVAR;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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