No abstract

Electricity provides a crucial service in our daily lives. However, in electricity systems mostly based on conventional, fossil-fuel fired technologies, an increase in electricity demand also leads to higher greenhouse gas emissions and, in countries without fossil-fuel resources, also increases their dependence on foreign energy sources. In more decarbonised electricity systems, with a high penetration of variable renewable energy sources, strong increases in electricity demand lead to higher system costs, given the need for back-up. Therefore, identifying the drivers of electricity demand is an academically-relevant, but also a policy-relevant exercise, since specific policy measures can be linked to those drivers. The aim of this paper is to assess the drivers of electricity demand in Spain in the period immediately after the economic crisis (2013–2017), with the help of a unique database of Spanish households and econometric modeling. Our results show that electricity demand in this period has mostly been driven by price changes. Demand has been highly price-elastic, with price elasticities being much higher (in absolute values) than in previous studies and periods. It is also negatively driven by the features of the household and its breadwinners (whether they are single-parent households or its members are foreign residents) and positively driven by income, the hours of sun and temperature changes, although the influence of these variables is much lower. In contrast, other variables do not seem to have an influence on demand, including the age of the breadwinners and their working situation (whether they are unemployed or not). These results suggest that price-based instruments, i.e., measures with an impact on electricity prices, would be the most effective to curb electricity demand.