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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
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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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