Price Elasticity and Beyond: The Determinants of Residential Electricity Consumption in New York

36 Pages Posted: 3 Jun 2021

See all articles by Etienne Billette de Villemeur

Etienne Billette de Villemeur

Lille University; CNRS - Lille Economics & Managment - UMR 9221

Pierre-Olivier Pineau

HEC Montreal - Department of Decision Sciences

Nima Rafizadeh

HEC Montreal

Date Written: June 2, 2021

Abstract

The price elasticity of electricity demand has been the focus of an important literature, because of the potential impact it has on energy and economic policy. We contribute to it by looking at the state of New York case in an innovative way. We construct a three-dimensional (utility × county × year) panel dataset of electricity sales to residential consumers from 21 electric utilities in all 62 counties of state of New York over the years of 1994 to 2013 to estimate the price elasticity of residential electricity average demand (per household). Such data enables us to account for differences within a large jurisdiction, without having to rely on household-level data, which are difficult to obtain, especially over different years. We find that the short-run and intermediate-run price elasticity of demand are respectively in the vicinity of -0.04 and -0.07 and that the long-run elasticity is around -0.60. We also investigate how the price elasticity varies in different contexts, as described by time period, price level, income level, weather indicators, and other variables. We find that once we take into account the heterogeneity of contexts, the multiplicity of significant price elasticities of demand make it difficult to have a valid, global, interpretation of the impact of a price change upon households. There is such an heterogeneity of price elasticities across the different contexts that one should be cautious on its use for policy, as a single value may not represent any consumer at all.

Keywords: Electricity Demand, Price Elasticity, Panel Data Estimation, New York State

JEL Classification: C23, L52, Q41, Q58

Suggested Citation

Billette de Villemeur, Etienne and Billette de Villemeur, Etienne and Pineau, Pierre-Olivier and Rafizadeh, Nima, Price Elasticity and Beyond: The Determinants of Residential Electricity Consumption in New York (June 2, 2021). Available at SSRN: https://ssrn.com/abstract=3858877 or http://dx.doi.org/10.2139/ssrn.3858877

Etienne Billette de Villemeur

Lille University ( email )

Lille
France

CNRS - Lille Economics & Managment - UMR 9221 ( email )

Lille
France

Pierre-Olivier Pineau (Contact Author)

HEC Montreal - Department of Decision Sciences ( email )

3000 Côte-Sainte-Catherine Road
Montreal, QC H2S1L4
Canada

Nima Rafizadeh

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

HOME PAGE: http://www.nimarafizadeh.com/

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