The Power of Substitution: Short-Run Electricity Demand Flexibility

Martin Blomhoff Holm and Katinka Holtsmark

No 21859, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We estimate short-run electricity demand responses to price changes for Norwegian households from 2023 to 2025, using continental solar and wind forecasts, and hydrological inflow to instrument supply-driven price variation. The presence of several instruments for the price changes allows us to explicitly test the margins at which substitution happens. Households’ electricity substitution is real but coarse: households mostly choose between day and night consumption with a price elasticity of 0.073. Substitution across hours within these blocks, or across days, is more limited.

Keywords: Real time pricing; Intertemporal substitution (search for similar items in EconPapers)
JEL-codes: D12 L94 Q41 Q48 (search for similar items in EconPapers)
Date: 2026-08
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