Measuring the impact of time-of-use pricing on electricity consumption: Evidence from Spain

Jacint Enrich, Ruoyi Li, Alejandro Mizrahi and Mar Reguant

Journal of Environmental Economics and Management, 2024, vol. 123, issue C

Abstract: We evaluate the effect of a time-of-use pricing program introduced in Spain on residential electricity consumption. Using a Difference-in-Difference approach, we find that households responded by reducing consumption during peak hours. We then use machine learning for variable selection and show that it is able to capture pre-trends unrelated to the policy, improving the credibility of our estimates. We find that the program could have reduced consumption by up to 9% during peak periods, with significant spillovers to weekends. Using a more conservative estimator, we find that it reduced consumption by at least 1%–2% during peak periods. We find evidence of habit formation during periods of uniform pricing, accompanied by an adaptation process that ends with a permanent change in consumption behavior. The results suggest that a predetermined pricing program can enhance consumer awareness and increase household price elasticity, thus making it an effective policy tool to reduce peak electricity demand and improve market efficiency.

Keywords: Demand response; Dynamic pricing; Electricity (search for similar items in EconPapers)
JEL-codes: H23 L94 Q41 Q48 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0095069623001195
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:123:y:2024:i:c:s0095069623001195

DOI: 10.1016/j.jeem.2023.102901

Access Statistics for this article

Journal of Environmental Economics and Management is currently edited by M.A. Cole, A. Lange, D.J. Phaneuf, D. Popp, M.J. Roberts, M.D. Smith, C. Timmins, Q. Weninger and A.J. Yates

More articles in Journal of Environmental Economics and Management from Elsevier
Bibliographic data for series maintained by Catherine Liu ().