Price and Income Elasticities of Residential Energy Demand in Germany

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. Price and Income Elasticities of Residential Energy Demand in GermanyIsabella Schulte * , Peter Heindl † July 2016 AbstractWe apply a quadratic expenditure system to estimate price and expenditure elasticities of residential energy demand (electricity and heating) in Germany. Using official expenditure data from 1993 to 2008, we estimate an expenditure elasticity for electricity of 0.3988 and of 0.4055 for space heating. The own price elasticity for electricity is -0.4310 and -0.5008 in the case of space heating. Disaggregation of households by expenditure and demographic composition reveals that the behavioural response to energy price changes is weaker (stronger) for low-income (top-income) households. There are considerable economies of scale in residential energy use but scale effects are not well approximated by the new OEDC equivalence scale. Real increases in energy prices show a regressive pattern of incidence, implying that the welfare consequences of direct energy taxation are larger for low income households. The application of zero-elasticities in assessments of welfare consequences of energy taxation strongly underestimates potential welfare effects. The increase in inequality is 22% smaller when compared to the application of rich and disaggregated behavioural response patterns as estimated in this paper.

Switching on Electricity Demand Response: Evidence for German Households

“…Yet, as elasticity estimates are hardly comparable across countries due to countryspecific heterogeneity, it is reasonable to compare our estimate with those of former German studies. While empirical evidence for Germany is rare, our price elasticity estimate is in line with Schulte and Heindl (2017). These authors find a quite similar own-price elasticity of -0.43 for German residential electricity consumption (1993)(1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004)(2005)(2006)(2007)(2008), using cross-sectional data originating from Germany's Income and Expenditure Survey, which is conducted at 5-year intervals.…”

“…Although the demand for electricity has been investigated by economists ever since its discovery, no broad consensus has been reached about the size of the response of residential electricity demand to changing power prices. In fact, price elasticity estimates cover a large range, stretching from 0, that is, an entirely price-inelastic demand, to a highly elastic response as indicated by an elasticity estimate of about -2.5 (Alberini and Fillipini, 2011;Fell et al, 2014;Labandeira et al, 2006;Reiss and White, 2005;Schulte and Heindl, 2017;Shin, 1985;Taylor, 1975).…”

A Deprivation-Based Assessment of Energy Poverty: Conceptual Problems and Application to Germany

“…as used by the European Statistical Office, is to assign a weight of 0.5 to an additional adult person in the household and a weight of 0.3 to each child in the household (Hagenaars et al, 1994). This (so called 'new' or 'modified' OECD equivalence scale) matches income and expenditure of German households well (Kohn and Missong, 2003;Schulte and Heindl, 2017). Let be the number of adult persons in the household and the number of children.…”

“…First, the proposed indicator in fact takes a 'low income' perspective, but not a 'high cost' perspective. Second, the large share of single households within the group of the energy poor may be reasonable because of strong economies of scale in energy use (Schulte and Heindl, 2017). Third, the significant deviation of average room temperatures can be interpreted as additional evidence for deprivation, in particular with respect to heating.…”

Factors affecting industrial coal demand in Turkey

“…When the literature concerning energy economy is analyzed, it is observed that the studies generally tend to focus on the relationships between energy consumption and economic growth, [10][11][12] and energy demand. [13][14][15][16] The elasticity of total energy demand, 16,17 electricity demand, 18,19 natural gas demand, 13,20 coal demand, 21,22 petroleum demand, 23,24 and gasoline demand 25,26 were examined in the studies conducted on energy demand.…”