Umeċ Economic Studies, Department of Economics, Umeċ University
Power to the people: Electricity demand and household behavior
Abstract: Paper [I] Using a unique and highly detailed data set on
energy consumption at the appliance-level for 200 Swedish households,
seemingly unrelated regression (SUR)-based end-use specific load curves are
estimated. The estimated load curves are then used to explore possible
restrictions on load shifting (e.g. the office hours schedule) as well as
the cost implications of different load shift patterns. The cost
implications of shifting load from "expensive" to "cheap" hours, using the
Nord Pool spot prices as a proxy for a dynamic price, are computed to be
very small; roughly 2-4% reduction in total daily costs from shifting load
up to five hours ahead, indicating small incentives for households (and
retailers) to adopt dynamic pricing of electricity.
Paper [II] Using a
detailed data set on appliance-level electricity consumption at the hourly
level, we provide the first estimates of hourly and end-use-specific income
elasticities for electricity. Such estimates are informative about how
consumption patterns in general, and peak demand in particular, will
develop as households income changes. We find that the income elasticities
are highest during peak hours for kitchen and lighting, with point
estimates of roughly 0.4, but insignificant for space heating.
[III] In this paper, I estimate the price elasticity of electricity as a
function of the choice between fixed-price and variable-price contracts.
Further, assuming that households have imperfect information about
electricity prices and usage, I explore how media coverage of electricity
prices affects electricity demand, both by augmenting price responsiveness
and as a direct effect of media coverage on electricity demand, independent
of prices. I also address the endogeneity of the choice of electricity
contract. The parameters in the model are estimated using unique and
detailed Swedish panel data on monthly household-level electricity
consumption. I find that price elasticities range between -0.025 and -0.07
at the mean level of media coverage, depending on contract choice, and that
households with monthly variation in electricity prices respond more to
prices when there is extensive media coverage of electricity prices. When
media coverage is high, for example 840 news articles per month (which
corresponds to the mean plus two standard deviations), the price elasticity
is -0.12, or 1.7 times the elasticity at the mean media coverage.
Similarly, media coverage is also found to have a direct effect on
Paper [IV] I explore how households switch between
fixed-price and variable-price electricity contracts in response to
variations in price and temperature, conditional on previous contract
choice. Using panel data with roughly 54000 Swedish households, a dynamic
probit model is estimated. The results suggest that the choice of contract
exhibits substantial state dependence, with an estimated marginal effect of
previous contract choice of 0.96, and that the effect of variation in
prices and temperature on the choice of electricity contract is small.
Further, the state dependence and price responsiveness are similar across
housing types, income levels and other dimensions. A plausible explanation
of these results is that transaction costs are larger than the relatively
small cost savings from switching between contracts.
Keywords: electricity demand; real-time pricing; demand flexibility; appliance-level data; end-use; media; contract choice; deregulated market; household behavior; information; (follow links to similar papers)
JEL-Codes: C30; D10; D12; D83; Q26; Q41; Q48; (follow links to similar papers)
25 pages, February 1, 2017
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