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A cross-country analysis of residential electricity demand in 11 OECD-countries

Krishnamurthy, C.K.B. and B. Kriström. (2015) Resource and Energy Economics 39:68-88.

Abstract:

We provide consistent, cross-country estimates of price and income elasticity for households in 11 OECD countries. Using survey data from 2011 on annual consumption of electricity and samplederived average electricity price, we provide country-specific price elasticity estimates and average income elasticity estimates. For most countries in our sample, we find strong price responsiveness, with elasticities varying (in absolute value) between 0.27 for South Korea and 1.4 for Australia, and higher than 0.5 for most countries. Exploiting the presence of many attitudinal indicators in the dataset, we provide evidence that non-price related factors to affect energy demand; in particular, households’ self-reported energy savings behaviour reduces demand between 2 and 4%. In contrast, we find very weak income responsiveness, with income elasticities varying from 0.07 to 0.16 and no evidence for heterogeneity across the countries in our sample. Our results regarding price elasticity are in contrast with those of many existing studies which find low-to-moderate price responsiveness, and adds to a few recent studies indicating more policy space for demand reduction than previously thought.

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Keywords: Residential electricity demand, Price elasticity

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