Going beyond tradition: Estimating residential electricity demand using an appliance index and energy services

Nina Boogen, Souvik Datta and Massimo Filippini

No 14/200, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: In this paper we estimate the long- and short-run price elasticities of residential electricity consumption in Switzerland from a household survey by constructing an index of the stock of household appliances as well as by using energy services. We create the index by aggregating the information on the major household appliances. The index is used to estimate the impact of appliances on residential electricity demand. Furthermore, we also use energy services to estimate the electricity demand. We adopt an instrumental variables approach to obtain consistent estimates of the price elasticity to account for potential endogeneity concerns with the average price as well as the appliance index. Our results suggest that the price elasticity is around -0.6. We conclude that Swiss households are price inelastic in electricity prices. This can be used for policy makers as well as by utility companies to design pricing instruments to modify electricity consumption. We also find that estimates of the electricity demand when we substitute the usual residential characteristics with energy services are quite comparable.

Keywords: Residential electricity; appliance stock index; energy services; instrumental variables (search for similar items in EconPapers)
JEL-codes: D D1 Q Q4 Q5 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2014-07
New Economics Papers: this item is included in nep-ene, nep-eur and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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