The Influence of Decarbonization on Electricity Demand

Sérgio Cruz

No 2025/0376, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: This paper analyzes the impact of key decarbonization and economic factors on electricity consumption supplied through the power grid in Portugal, between 1995 and 2023. Energy eciency surges as one of the variables with the most significant coecients, as a result of the policies that encourage the reduction of energy/electri- city consumption. Though self-consumption generally reduces pressure over the grid demand, its effect remains small and sometimes statistically insignificant. However, continuous monitoring is essential to anticipate its future impact on grid-supplied electricity. Additionally, as Portuguese regions shift towards the service sector, elec- tricity consumption is increasing, likely driven by electric-intensive service subsectors and increased digitalization. Electrification also shows a positive impact on the elec- tricity demand. A comprehensive approach to assess long-term electricity demand that manages these many confounding effects, will better guide investment decisions in grid infrastructure, provide clearer insights into the future evolution of allowable revenues and grid tariffs, and help meet the EU's decarbonization targets.

Keywords: decarbonization, electrication, energy eciency, electricity demand, in- 21 come elasticity (search for similar items in EconPapers)
JEL-codes: Q41 Q43 (search for similar items in EconPapers)
Date: 2025-04
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