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Deriving Electricity Demand Elasticities from a Simulation Model

The paper reports a method of estimating aggregate residential electricity demand elasticities with respect to price and household income. Short-run models of electricity use and linear probability models of equipment ownership are developed using household data. These are incorporated in a model that simulates the development of the stock of dwellings and electricity-using equipment through time to derive short and long-run price and income elasticities. Results for a wide range of equipment types are presented. Test results reveal the influence of dwelling stock dynamics on long-run aggregate elasticities that have not been reported in other studies.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Electricity – Markets and Prices

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: Electricity demand elasticities, Simulation model, Household data,

DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No3-4

Published in Volume 10, Number 3 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.