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The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation

Tatyana Deryugina (), Alexander MacKay and Julian Reif

No 23483, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the dynamics of residential electricity demand by exploiting a natural experiment that produced large and long-lasting price changes in over 250 Illinois communities. Using a flexible difference-in-differences matching approach, we estimate that the price elasticity of demand grows from –0:09 in the first six months to –0:27 two years later. We also estimate a more sophisticated model in which usage is a function of past and future prices, and we find similar elasticity patterns. Our findings highlight the importance of accounting for consumption dynamics when evaluating energy policy.

JEL-codes: D12 Q41 Q48 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-reg
Date: 2017-06
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