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The Power of Substitution: Short-Run Electricity Demand Flexibility

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  • Holm, Martin Blomhoff
  • Holtsmark, Katinka

Abstract

We estimate short-run electricity demand responses to price changes for Norwegian households from 2023 to 2025, using continental solar and wind forecasts, and hydrological inflow to instrument supply-driven price variation. The presence of several instruments for the price changes allows us to explicitly test the margins at which substitution happens. Households’ electricity substitution is real but coarse: households mostly choose between day and night consumption with a price elasticity of 0.073. Substitution across hours within these blocks, or across days, is more limited.

Suggested Citation

  • Holm, Martin Blomhoff & Holtsmark, Katinka, 2026. "The Power of Substitution: Short-Run Electricity Demand Flexibility," CEPR Discussion Papers 21859, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21859
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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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