Scandinavian Working Papers in Economics

CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

No 2014:16: Residential End use electricity demand and the implications for real time pricing in Sweden

Mattias Vesterberg (), Chandra Kiran B. Krishnamurthy () and Oben Bayrak ()
Additional contact information
Mattias Vesterberg: CERE, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden
Chandra Kiran B. Krishnamurthy: CERE, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden
Oben Bayrak: CERE, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden

Abstract: Using a unique and highly detailed data set of energy consumption at the appliance-level for 390 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 aggregate spot price data, is computed to be very small; roughly 2-5% daily cost reduction from shifting load up to seven hours ahead, indicating small incentives for households (and suppliers) to adopt dynamic pricing of electricity. In addition, end-use-specific income elasticites are also estimated, for the first time for Sweden, using again a SUR framework. The estimated income elasticties are large and significant, varying from a high of 0.8-1.25 for heating to a low of 0.2-0.5 for lighting. Aggregate income elasticity is also high, varying from 0.5 to 0.81. Our results have important implications for Swedish energy policy, in particular for the Swedish government’s stated goal of realtime pricing.

Keywords: Direct Metering; Residential Electricity Demand; Real time electricity pricing

JEL-codes: C30; D12; Q41; Q48

42 pages, December 5, 2014

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