Why Electricity Demand Is Highly Income-Elastic in Spain: A Cross-Country Comparison Based on an Index-Decomposition Analysis

Abstract

Since 1990, Spain has had one of the highest elasticities of electricity demand in the European Union. We provide an in-depth analysis into the causes of this high elasticity, and we examine how these same causes influence electricity demand in other European countries. To this end, we present an index-decomposition analysis of growth in electricity demand which allows us to identify three key factors in the relationship between gross domestic product (GDP) and electricity demand: (i) structural change; (ii) GDP growth; and (iii) intensity of electricity use. Our findings show that the main differences in electricity demand elasticities across countries and time are accounted for by the fast convergence in residential per capita electricity consumption. This convergence has almost concluded, and we expect the Spanish energy demand elasticity to converge to European standards in the near future.

Electricity demand during pandemic times: The case of the COVID-19 in Spain

“…In general, the sensitivity of energy demand to price variations, which is known as the electricity price elasticity, varies across countries, sectors, and time. In some countries such as Spain or Italy, there is a greater response of electricity demand to a variation in prices, unlike other EU countries, where the behavior is more inelastic ( Huntington et al, 2019 ) ( Gil-Alana et al, 2020 ) ( Pérez-García and Moral-Carcedo, 2016 ) ( Pérez-García and Moral-Carcedo, 2017 ). However, even in these countries, electricity demand in the residential sector is more price inelastic, with values of elasticity lower than in the industrial sector ( Huntington et al, 2019 ) ( Pérez-García and Moral-Carcedo, 2017 ).…”

“…In some countries such as Spain or Italy, there is a greater response of electricity demand to a variation in prices, unlike other EU countries, where the behavior is more inelastic ( Huntington et al, 2019 ) ( Gil-Alana et al, 2020 ) ( Pérez-García and Moral-Carcedo, 2016 ) ( Pérez-García and Moral-Carcedo, 2017 ). However, even in these countries, electricity demand in the residential sector is more price inelastic, with values of elasticity lower than in the industrial sector ( Huntington et al, 2019 ) ( Pérez-García and Moral-Carcedo, 2017 ). Determining all the factors and the extent to which they affect the demand for electricity in a particular place is quite complex ( Gil-Alana et al, 2020 ) ( Lehto, 2011 ) ( Pérez-García and Moral-Carcedo, 2016 ) ( Moral-Carcedo and Pérez-García, 2019 ).…”

“…It can, therefore, be seen that shifting consumption to other times, instead of concentrating it mainly on two peaks, leads to a saving in the total daily price, which has allowed many users to compensate in their bill for the monthly increase in demand during the confinement period, thanks to the change in consumption habits. However, to carry out, under normal circumstances, demand management measures in the residential sector, which it has been already mentioned that is not characterized by a very elastic behavior concerning price variation, some authors suggest that for an effective impact on household electricity demand it would be required adopting not only measures based on prices (taxation and so on) or subsidizing investment in more efficient technologies but also psychology based incentives or even compulsory measures ( Pérez-García and Moral-Carcedo, 2017 ).…”

Assessment of the Progress towards the Management of Renewable Energy Consumption in the Innovativeness Context—A Country Approach

“…DSM provides greater demand-side flexibility in the energy system and helps to achieve environmental goals through controlled consumption [55]. Pérez-García and Moral-Carcedo [56] pointed out that managing household electricity demands requires price-fixing measures (taxes, etc.) or subsidizing investments in more efficient technologies, as well as psychology-based incentives or coercive measures.…”

Aging Characterization of Modified Insulating Paper Based on the Transmission Characteristics of Microstrip Resonant Sensors

“…With the continuous growth of global electricity demand, higher requirements are put forward for the power system [1][2][3]. The power transformer is an important part of the power system, which plays a key role in power generation, transmission and distribution, realizing the functions of voltage transformation, power grid stability, power transmission and system interconnection [4,5].…”