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A New Approach to Modeling the Effects of Temperature Fluctuations on Monthly Electricity Demand

Author

Listed:
  • Yoosoon Chang

    (Department of Economics, Indiana University)

  • Chang Sik Kim

    (Department of Economics, Sungkyunkwan University, Seoul 110-745, Korea)

  • J. Isaac Miller

    (Department of Economics, University of Missouri)

  • Joon Y. Park

    (Department of Economics, Indiana University and Sungkyunkwan University)

  • Sungkeun Park

    ( Korea Institute for Industrial Economics and Trade)

Abstract

This paper proposes a novel approach to measure and analyze the effect of temperature on electricity demand. This temperature effect is specified as a function of the density of temperatures observed at a high frequency with a functional coefficient, which we call the temperature response function. This approach contrasts with the usual approach to model the temperature effect as a function of heating and cooling degree days. We further investigate how non-climate variables, which include the price of electricity relative to that of substitutable energy and latent variables such as preferences and technology that we proxy by a linear time trend, affect the demand response to temperature changes. Our approach and methodology are demonstrated using Korean electricity demand data for residential and commercial sectors.

Suggested Citation

  • Yoosoon Chang & Chang Sik Kim & J. Isaac Miller & Joon Y. Park & Sungkeun Park, 2015. "A New Approach to Modeling the Effects of Temperature Fluctuations on Monthly Electricity Demand," Working Papers 1512, Department of Economics, University of Missouri.
    • Handle: RePEc:umc:wpaper:1512
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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