Peak and Off-Peak Demand for Electricity: Subsistence Levels and Price Elasticities

Abstract

In this paper, we explore subsistence levels and price elasticities for residential electricity demand in Sweden. Using a Stone-Geary functional form and unique Swedish data on residential electricity usage, we estimate demand Equations for peak and off-peak demand. We find that the subsistence levels are larger during peak than off-peak, and that there is a substantial variation in these subsistence levels across months. As a result, price responsiveness varies across hours and seasons.

This has important policy implications, not the least with respect to effects of real time pricing, as it suggests that there are limits to households’ price responsiveness.

Keywords: Dynamic price, Structural modeling, Stone Geary, Real time pricing 1

JEL Classification: D10, D12, Q41