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Price Elasticity of Electricity Demand in France
[L’élasticité‑prix de la demande d’électricité en France]

Author

Listed:
  • Stéphane Auray

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Vincenzo Caponi

    (CREST - Center for Research in Extreme Scale Technologies [Bloomington] - Indiana University [Bloomington] - Indiana University System)

  • Benoît Ravel

    (Datastorm)

Abstract

Competition and climate becoming more important for electricity production and consumption, market operators are increasingly interested in reliable forecasts of electricity prices and consumption for planning their investments and regulating policies. Key for good forecasts is understanding the consumers' reaction to price changes, synthesized by the concept of elasticity. Using a unique dataset of millions of bi‑annual meter readings of electricity consumption in France from 2007 to 2015, we estimate the price elasticity of electricity expenditure of private households. We propose three specifications: a canonical one that regresses electricity consumption on a price per kilowatt/hour, where we find an elasticity equal to ‑0.8, a result remarkably in line and corroborating previous literature; a specification that follows Filippini's (1995) model of an Almost Ideal Demand System (AIDS), in which we substantially replicate his results; and finally, an extension of the latter that allows elasticities to be season‑dependent that shows the demand of electricity being more elastic in summer.

Suggested Citation

  • Stéphane Auray & Vincenzo Caponi & Benoît Ravel, 2019. "Price Elasticity of Electricity Demand in France [L’élasticité‑prix de la demande d’électricité en France]," Post-Print hal-05296125, HAL.
    • Handle: RePEc:hal:journl:hal-05296125
    DOI: 10.24187/ecostat.2019.513.2002
    Note: View the original document on HAL open archive server: https://insee.hal.science/hal-05296125v1
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    Cited by:

    1. is not listed on IDEAS
    2. Crampes, Claude & Lefouili, Yassine, 2021. "Green Energy Pricing for Digital Europe," TSE Working Papers 21-1209, Toulouse School of Economics (TSE).
    3. Yang, Yuting, 2022. "Electricity interconnection with intermittent renewables," Journal of Environmental Economics and Management, Elsevier, vol. 113(C).
    4. Frédéric Cherbonnier & Christian Gollier, 2022. "Risk-adjusted Social Discount Rates," Post-Print hal-04012977, HAL.
    5. Ciarreta, Aitor & Espinosa, Maria Paz & Pizarro-Irizar, Cristina, 2023. "Pricing policies for efficient demand side management in liberalized electricity markets," Economic Modelling, Elsevier, vol. 121(C).
    6. Stéphane AURAY & Vincent CAPONI, 2020. "A Vector Autoregressive Model of Forecast Electricity Consumption in France," Working Papers 2020-06, Center for Research in Economics and Statistics.

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    Keywords

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    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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