A Cross-Country Analysis of Residential Electricity Demand In 11 OECD-Countries

Abstract

We provide consistent, cross-country estimates of price and income elasticity for the residential sector of 11 OECD countries. Using survey data from 2011 on annual consumption of electricity and sample-derived average electricity price, we provide country-specific price elasticity estimates and average income elasticity estimates. For most countries in our sample, we find strong price responsiveness, with elasticities varying between -0:27 for South Korea and -1:4 for Australia, with most countries elasticity being above (in absolute value) -0:5. Exploiting the presence of many attitudinal indicators, we find evidence for non-price related factors, in particular households’ self-reported energy saving behavior, to reduce energy demand between 2 and 4%. In contrast, we find very weak income response, with income elasticities varying from 0:07 to 0:14 and no evidence for heterogeneity across the countries in our sample. Our results regarding price elasticity are in contrast with many existing studies which find low-to-moderate price responsiveness, and adds to a few recent studies indicating more policy space for demand reduction than previously thought.