Demand Elasticity Estimation from the Japanese National Electricity Grid Considering Wholesale Market Price

Abstract

Estimating the electricity demand elasticity is the fundamental step in designing an efficient demand response program, which includes sophisticated mathematical optimization from the perspectives of consumer satisfaction, dynamic elasticities, supplier strategies, and energy authority policies. This study aims to estimate the static elasticity of electricity demand considering the Japanese wholesale market price and the amount of energy demand in the national grid. The study acquired the data of the Japanese regional grids in the form of supply and demand electricity quantities in GWh from the regional transmission and distribution utilities. The supply quantities are quantified based on the energy production technology, while the demand quantities are obtained in hourly intervals for the period of April 2016 to March 2022. The developed econometric employed the two-stage least square estimation method. From the results, the static electricity demand elasticity is found to be 0.14%, which is justified as the impact of raising the wholesale market price by one ¥/kWh that will affect the national demand quantity a by 0.14% drop, and vice versa.