Residential consumption of gas and electricity in the U.S.: The role of prices and income

Abstract

SummaryWe study residential demand for electricity and gas, working with nationwide householdlevel data that cover recent years, namely [1997][1998][1999][2000][2001][2002][2003][2004][2005][2006][2007]. Our dataset is a mixed panel/multiyear cross-sections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. To our knowledge, this is the most comprehensive set of data for examining household residential energy usage at the national level, containing the broadest geographical coverage, and with the longest longitudinal component (up to 6 observations per dwelling). We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the -0.860 to -0.667 range, while the own price elasticity of gas demand is -0.693 to -0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999;Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small. These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our results suggest that there might be greater potential for policies which affect energy price than may have been previously appreciated. Keywords AbstractWe study residential demand for electricity and gas, working with nationwide household-level data that cover recent years, namely 1997-2007. Our dataset is a mixed panel/multi-year crosssections of dwellings/households in the 50 largest metropolitan areas in the United States as of 2008. To our knowledge, this is the most comprehensive set of data for examining household residential energy usage at the national level, containing the broadest geographical coverage, and with the longest longitudinal component (up to 6 observations per dwelling).We estimate static and dynamic models of electricity and gas demand. We find strong household response to energy prices, both in the short and long term. From the static models, we get estimates of the own price elasticity of electricity demand in the -0.860 to -0.667 range, while the own price elasticity of gas demand is -0.693 to -0.566. These results are robust to a variety of checks. Contrary to earlier literature (Metcalf and Hassett, 1999;Reiss and White, 2005), we find no evidence of significantly different elasticities across households with electric and gas heat. The price elasticity of electricity demand declines with income, but the magnitude of this effect is small.These results are in sharp contrast to much of the literature on residential energy consumption in the United States, and with the figures used in current government agency practice. Our resu...

Forecasting residential electricity demand in provincial China

“…In order to capture the impact of previous electricity consumption, 1-year lagged residential electricity consumption is included in the specification. In addition to income, residential electricity consumption can be influenced by a variety of factors, such as electricity price, alternative energy price, urbanization rate, electricity access rate, and heating degree days (Alberini et al 2011;Blázquez et al 2013;Dergiades and Tsoulfidis 2008;Holtedahl and Joutz 2004;Musango 2014). Similar to Schmalensee et al (1998), we include only per capita income in the reduced function, leaving the other explanatory variables uncontrolled for the following reasons.…”

Análisis de la demanda residencial de los servicios básicos en España usando un modelo QUAIDS censurado

“…En general, la elasticidad precio de la demanda de electricidad estimada en este artículo se encuentra respaldada por los resultados de Blundell y Robin (1999), Gundimeda y Köhlin (2008) y Alberini et al (2011) 534 0,531 0,299 0,763 0,101 0,047 0,663 1,842 1,559 2,126 0,347 0,259 0,666 0,185 0,768 0,038 0,151 similitud con los resultados de Labandeira et al (2006) quienes analizan la demanda de energía en los hogares españoles.…”

“…Por otro lado, si bien la elasticidad ingreso del gas natural es positiva y menor que la unidad, la Tabla 1 presenta una cifra para dicha sensibilidad mayor que Liao y Chang (2002) y Alberini et al (2011). Tal como se ha comentado, estas diferencias pueden surgir debido a los datos utilizados, la crisis económica que afecta a los hogares españoles en 2012 y al tratamiento de la censura que surge del consumo del gas natural.…”

“…Los datos también muestran que, en relación con la electricidad, el gas licuado de petróleo (GLP) es considerado como un bien complementario y que el keroseno no afecta a su consumo. Por otro lado, Alberini et al (2011) estudian la demanda residencial de electricidad y gas en EE.UU. mediante un modelo de una ecuación estático y otro dinámico.…”

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“…The demand for electricity and heating services -both mostly produced by burning coal or natural gas -and for gasoline -which is obtained from the distillation of petroleum -is commonly considered to be very inelastic, especially in the short-to medium-run. For electricity, recent studies such as Lijesen (2007) and Alberini et al (2011) estimate the short-run demand elasticity to be significantly smaller than one. As a consequence a large fall in the price of electricity is needed in order for a large increase in coal demand to occur.…”