The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation

Abstract

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How Much do Households Respond to Electricity Prices? Evidence from Australia and Abroad

“…Looking overseas, Deryugina et al . (2020) provides results that are closest to estimates of elasticities for households. They examined the Illinois Municipal Aggregation programme, which was a programme that allowed communities in Illinois to aggregate their demand for the municipality to negotiate for a deal with an electricity supplier.…”

“…(2019) and Deryugina et al . (2020), in combination with those for shorter time periods, are suggestive of the conditions under which households are most likely to substantially respond to the incentives provided by cost reflective pricing. The conditions under which moderating consumption will result in a financial payoff need to be clear to the household.…”

“…The way the programme was implemented created a de facto natural experiment, which means that Deryugina et al . (2020) are confident these represent causal effects. The estimates are broadly similar to the long‐run estimates using annual data, albeit lower.…”

“…The work of Deryugina et al . (2020) suggests a promising direction for further research to be undertaken for Australia. Following households or even small communities and observing their demand by month (rather than by year) over several years offers the promise of learning more about the responsiveness of demand as households adjust to the new price policy over time.…”

Dynamic Corrective Taxes with Time-Varying Salience

“…Estimates of the elasticity of electricity demand vary in the literature. We do not wish to provide a full review of the electricity demand elasticity literature here, but as a few recent examples, Alberini & Filippini (2011) estimate short run elasticities between -0.8 and -0.15, Filippini et al (2016) between -0.12 and-0.27, andDeryugina et al (2017) of about -0.16. We take the low end of this range and use -0.1 because we have very short run (daily) behavior in mind for our model.…”