Switching on Electricity Demand Response: Evidence for German Households

30 Pages Posted: 18 Jun 2018

See all articles by Manuel Frondel

Manuel Frondel

RWI Leibniz Institute for Economic Research ; Ruhr University Bochum (RUB)

Gerhard Kussel

RWI – Leibniz Institute for Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: June 18, 2018

Abstract

Empirical evidence on households’ awareness of electricity prices and potentially divergent demand responses to price changes conditional on price knowledge is scant. Using panel data originating from Germany’s Residential Energy Consumption Survey (GRECS), we fill this void by employing an instrumental-variable (IV) approach to cope with the endogeneity of the consumers’ tariff choice. By additionally exploiting information on the households’ knowledge about power prices, we combine the IV approach with an Endogenous Switching Regression Model to estimate price elasticities for two groups of households, finding that only those households that are informed about prices are sensitive to price changes, whereas the electricity demand of uninformed households is entirely price-inelastic. Based on these results, to curb the electricity consumption of the household sector and its environmental impact, we suggest implementing low-cost information measures on a large scale, such as improving the transparency of tariffs, thereby increasing the saliency of prices.

Keywords: Price Elasticity, Switching Regression Model, Information

JEL Classification: Q41, D12.

Suggested Citation

Frondel, Manuel and Kussel, Gerhard, Switching on Electricity Demand Response: Evidence for German Households (June 18, 2018). USAEE Working Paper No. 18-345. Available at SSRN: https://ssrn.com/abstract=3198420 or http://dx.doi.org/10.2139/ssrn.3198420

Manuel Frondel (Contact Author)

RWI Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
45128 Essen
Germany

Ruhr University Bochum (RUB) ( email )

Universitätsstraße 150
Bochum, NRW 44780
Germany

Gerhard Kussel

RWI – Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
27
Abstract Views
315
PlumX Metrics