Scandinavian Working Papers in Economics

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

No 2018:5: Peak and off-peak demand for electricity: subsistence levels and price elasticities

Runar Brännlund () and Mattias Vesterberg ()
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Runar Brännlund: CERE - the Center for Environmental and Resource Economics, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden
Mattias Vesterberg: CERE - the Center for Environmental and Resource Economics, Postal: Department of Economics, Umeå University, S-901 87, Umeå, Sweden

Abstract: In this paper, we explore subsistence levels and price elasticities for residential electricity demand in Sweden. Using a Stone-Geary functional form and unique Swedish data on residential electricity usage, we estimate demand Equations for peak and off-peak demand. We find that the subsistence levels are larger during peak than off-peak, and that there is a substantial variation in these subsistence levels across months. As a result, price responsiveness varies across hours and seasons. This has important policy implications, not the least with respect to effects of real time pricing, as it suggests that there are limits to households’ price responsiveness.

Keywords: Dynamic price; Structural modeling; Stone Geary; Real time pricing

JEL-codes: D10; D12; Q41

26 pages, May 25, 2018

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