Short- and Long-Run Electricity Demand Elasticities at the Subsectoral Level: A Cointegration Analysis for German Manufacturing Industries

Ronald Bernstein () and Reinhard Madlener
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Ronald Bernstein: E.ON Energy Research Center, Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University, Postal: Mathieustrasse 6, 52074 Aachen, Germany, http://www.eonerc.rwth-aachen.de/fcn

No 19/2010, FCN Working Papers from E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)

Abstract: In this paper we use multivariate cointegration analysis to estimate electricity demand elasticities at the subsectoral industry level. This enables us to reap the benefits of lower heterogeneity within the electricity-consuming sectors investigated and of retaining additional information otherwise blurred by aggregation. The annual data set used covers eight subsectors of the German economy for the period 1970-2007. By employing a cointegrated VAR model specification and accounting for structural breaks we find cointegration relationships for five of the eight subsectors studied. The long-run elasticities range between 0.70 and 1.90 for economic activity and between –0.52 and zero for the price of electricity. The short-run elasticities are estimated by single-equation error-correction modeling and found to be between 0.17 to 1.02 for economic activity and –0.57 to zero for electricity price. Granger-causality tests indicate that in the long term causality runs from both economic activity and electricity price to electricity consumption, while Granger-causality from electricity price and electricity consumption to economic activity is detected in only two subsectors. Electricity price is found to be Granger-caused neither in the long nor the short run. Finally, an impulse response analysis yields plausible results confirming the usefulness of the approach adopted.

Keywords: Disaggregated data; Elasticities; Cointegration; VECM; Granger-causality; Impulse responses; Structural breaks; Germany (search for similar items in EconPapers)
JEL-codes: Q41 Q43 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2010-11
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Short- and long-run electricity demand elasticities at the subsectoral level: A cointegration analysis for German manufacturing industries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:fcnwpa:2010_019

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