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A New Approach to Modeling the Effects of Temperature Fluctuations on Monthly Electricity Demand

Yoosoon Chang (), Chang Kim (), J. Miller (), Joon Park and Sungkeun Park
Additional contact information
Chang Kim: Department of Economics, Sungkyunkwan University, Seoul 110-745, Korea
Joon Park: Department of Economics, Indiana University and Sungkyunkwan University
Sungkeun Park: Korea Institute for Industrial Economics and Trade

No 1512, Working Papers from Department of Economics, University of Missouri

Abstract: This paper proposes a novel approach to measure and analyze the effect of temperature on electricity demand. This temperature effect is specified as a function of the density of temperatures observed at a high frequency with a functional coefficient, which we call the temperature response function. This approach contrasts with the usual approach to model the temperature effect as a function of heating and cooling degree days. We further investigate how non-climate variables, which include the price of electricity relative to that of substitutable energy and latent variables such as preferences and technology that we proxy by a linear time trend, affect the demand response to temperature changes. Our approach and methodology are demonstrated using Korean electricity demand data for residential and commercial sectors.

Keywords: electricity demand; temperature effect; temperature response function; cross temperature response function; electricity demand in Korea (search for similar items in EconPapers)
JEL-codes: C33 C51 C53 Q41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2015-09
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Journal Article: A new approach to modeling the effects of temperature fluctuations on monthly electricity demand (2016) Downloads
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