Journal
ENERGY POLICY
Volume 97, Issue -, Pages 235-249Publisher
ELSEVIER SCI LTD
DOI: 10.1016/j.enpol.2016.07.031
Keywords
Residential electricity demand; Price elasticity of demand; Household-level data; Rebound effect; Energy demand forecast
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Price elasticity estimates of residential electricity demand vary widely across the energy economics and policy literature. In this paper, we seek to explain these findings using three nationwide datasets from the U.S. - the American Housing Survey, Forms EIA-861, and the Residential Energy Consumption Survey. We examine the role of the sample period, level of aggregation, use of panel data, use of instrumental variables, and inclusion of housing characteristics and capital stock. Our findings suggest that price elasticities have remained relatively constant over time. Upon splitting our panel datasets into annual cross sections, we do observe a negative relationship between price elasticities and the average price. Whether prices are rising or falling appears to have little effect on our estimates. We also find that aggregating our data can result in both higher and lower price elasticity estimates, depending on the dataset used, and that controlling for unit-level fixed effects with panel data generally results in more inelastic demand functions. Addressing the endogeneity of price and/or measurement error in price with instrumental variables has a small but noticeable effect on the price elasticities. Finally, controlling for housing characteristics and capital stock produces a lower price elasticity. (C) 2016 Elsevier Ltd. All rights reserved.
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