How (In)elastic is the short-run demand for electricity?

Francesco Scarazzato

Economics Letters, 2025, vol. 254, issue C

Abstract: This paper examines how the aggregate demand for electricity responds to changes in hourly wholesale market prices. I focus on a hydropower-rich country and use data on imported wind energy and accumulated precipitation as instruments for price. Using data from Switzerland from 2016 to 2023, I find that both instruments have a strong and significant price-depressing effect, and I estimate the price elasticity of aggregate demand to be −0.1. However, this responsiveness is entirely driven by the consumption of storage systems and power plants, while end-user demand remains perfectly inelastic to price fluctuations in the short-run.

Keywords: Elasticity; Electricity demand; Storage; Hydroelectricity; Wind energy (search for similar items in EconPapers)
JEL-codes: D12 L94 Q25 Q41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002903

DOI: 10.1016/j.econlet.2025.112453

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