How aggregate electricity demand responds to hourly wholesale price fluctuations

Lion Hirth, Tarun M. Khanna and Oliver Ruhnau

Energy Economics, 2024, vol. 135, issue C

Abstract: Electricity needs to be consumed at the very moment of production, leading wholesale prices to fluctuate widely at (sub-)hourly time scales. This article investigates the response of aggregate electricity demand to such price variations. Using wind energy as an instrument, we estimate a significant and robust short-term price elasticity of about −0.05 in Germany and attribute this to industrial consumers. As the share of consumption that is exposed to real-time prices (currently less than 25%) expands, we expect the aggregated price elasticity to grow.

Keywords: Short-term price elasticity; Electricity markets; Demand response; Instrumental variables; Wind energy (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:135:y:2024:i:c:s0140988324003608

DOI: 10.1016/j.eneco.2024.107652

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