A New Look at Residential Electricity Demand Using Household Expenditure Data
The recent push for a federal energy policy that could substantially change electricity prices in the U.S. highlights the need to obtain accurate residential electricity demand estimates. Many electricity demand estimates have been obtained based on the assumption that consumers optimize with respect to known marginal prices, but increasing empirical evidence suggests that consumers are more likely to respond to average prices. Under this assumption, this paper develops a new strategy based on GMM to estimate household electricity demand. Our approach allows a national-level demand estimation from publicly available expenditure data and utility-level consumption data, complementing studies that use individual billing data which are richer yet often proprietary. We estimate the price elasticity near -1, which is at the upper end (in magnitude) among the estimates from previous studies. We apply our elasticity estimates in a U.S. climate policy simulation to determine how these elasticity estimates alter consumption and price outcomes compared to the more conservative elasticity estimates commonly used in policy analysis.
|Date of creation:||Jul 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Golden, Colorado 80401|
Phone: (303) 273-3480
Fax: (303) 273-3416
Web page: http://econbus.mines.edu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul, Anthony & Myers, Erica & Palmer, Karen, 2009. "A Partial Adjustment Model of U.S. Electricity Demand by Region, Season, and Sector," Discussion Papers dp-08-50, Resources For the Future.
- Herriges, Joseph A. & King, K.A., 1994. "Residential Demand for Electricity Under Block Rate Structures: Evidence from a Controlled Experiment," Staff General Research Papers 1498, Iowa State University, Department of Economics.
- Espey, James A. & Espey, Molly, 2004.
"Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities,"
Journal of Agricultural and Applied Economics,
Cambridge University Press, vol. 36(01), pages 65-81, April.
- Espey, James A. & Espey, Molly, 2004. "Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(01), April.
- Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011.
"Residential consumption of gas and electricity in the U.S.: The role of prices and income,"
Elsevier, vol. 33(5), pages 870-881, September.
- Anna Alberini & Will Gans & Daniel Velez-Lopez, 2011. "Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income," Working Papers 2011.01, Fondazione Eni Enrico Mattei.
- Anna Alberini & Gans Will & Daniel Lopez-Velez, 2010. "Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income," CEPE Working paper series 10-77, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Herriges, Joseph A & King, Kathleen Kuester, 1994. "Residential Demand for Electricity under Inverted Block Rates: Evidence from a Controlled Experiment," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(4), pages 419-30, October.
- Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
- Lester D. Taylor, 1975. "The Demand for Electricity: A Survey," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 74-110, Spring.
- Chong, Howard, 2012. "Building vintage and electricity use: Old homes use less electricity in hot weather," European Economic Review, Elsevier, vol. 56(5), pages 906-930.
- Shammin, Md Rumi & Bullard, Clark W., 2009. "Impact of cap-and-trade policies for reducing greenhouse gas emissions on U.S. households," Ecological Economics, Elsevier, vol. 68(8-9), pages 2432-2438, June.
When requesting a correction, please mention this item's handle: RePEc:mns:wpaper:wp201204. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Edward Balistreri)
If references are entirely missing, you can add them using this form.