Hourly Demand for Electricity in Sweden: Implications for Load, Welfare and Emissions

CERE Working Paper, 2019:4

39 Pages Posted: 18 Mar 2019

See all articles by Amin Karimu

Amin Karimu

University of Umea

Chandra Kiran Krishnamurthy

CERE, Umeå

Mattias Vesterberg

University of Umea - Centre for Environmental and Resource Economics

Date Written: February 22, 2019

Abstract

In this study, using sub-hourly appliance-level data from a representative sample of Swedish households on standard tariffs, we investigate the welfare and emission implications of moving to a mandatory dynamic pricing scheme. We treat demand during different hours of a day to affect utility differently, and account for the derived nature of electricity demand by explicitly considering the services (end-use demands) that drive hourly electricity demand. We use the flexible EASI demand system, which accommodates both observed and unobserved heterogeneity in preferences, to understand changes in load consequent to moving to dynamic pricing schemes. We find changes in load patterns across hours to be relatively small (with at most a three percent reduction during the morning peak, and a two percent increase in the off-peak times), and welfare and emissions to decrease slightly (a maximum of 0.2 percent and 0.25 percent, respectively). Overall, in the context of a decentralized electricity retail setting such as in Sweden, our results call into question both the desirability (from a short-run welfare perspective) or the feasibility (from a consumer perspective) of the emphasis on ensuring that the retail price of electricity be aligned to the hourly marginal cost.

Keywords: Appliance holdings, Electricity, Energy demand, Demand system, Dynamic pricing

JEL Classification: D12, Q41, C30

Suggested Citation

Karimu, Amin and Krishnamurthy, Chandra Kiran B and Vesterberg, Mattias, Hourly Demand for Electricity in Sweden: Implications for Load, Welfare and Emissions (February 22, 2019). CERE Working Paper, 2019:4 . Available at SSRN: https://ssrn.com/abstract=3340228 or http://dx.doi.org/10.2139/ssrn.3340228

Amin Karimu (Contact Author)

University of Umea ( email )

Chandra Kiran B Krishnamurthy

CERE, Umeå ( email )

Almas Allé 10
Umeå, 750 07
Sweden

HOME PAGE: http://cere.se/en.html

Mattias Vesterberg

University of Umea - Centre for Environmental and Resource Economics ( email )

Umeå, S-901 87
Sweden

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