Abstract
Since 1990, Spain has had one of the highest elasticities of electricity demand in the European Union. We provide an in-depth analysis into the causes of this high elasticity, and we examine how these same causes influence electricity demand in other European countries. To this end, we present an index-decomposition analysis of growth in electricity demand which allows us to identify three key factors in the relationship between gross domestic product (GDP) and electricity demand: (i) structural change; (ii) GDP growth; and (iii) intensity of electricity use. Our findings show that the main differences in electricity demand elasticities across countries and time are accounted for by the fast convergence in residential per capita electricity consumption. This convergence has almost concluded, and we expect the Spanish energy demand elasticity to converge to European standards in the near future.
Highlights
The pressing issue of global warming has fueled attention for long-run analyses of energy demand.Competing hypotheses about the causality between economic growth and energy consumption call for very different degrees of activism for energy conserving policies
The current paper provides an in-depth analysis of the relationship between electricity consumption and economic growth for all 28 countries of the European Union (EU)
We consider the evolution of electricity demand elasticity in Spain, and we present a simple framework that allows us to understand how changes in electricity demand elasticity can be related to deep economic transformations reflected in: (i) structural change; (ii) gross domestic product (GDP) growth; and (iii) the intensity of electricity use
Summary
The pressing issue of global warming has fueled attention for long-run analyses of energy demand. If the link between energy consumption and economic growth can be broken down by sectors (residential and no-residential) that reacts in a different way to certain type of policies (for example, measures based on prices), the policy effectiveness will be conditioned critically by the contribution to energy consumption growth of each sector In this way, some recent works have tried to estimate this time-varying elasticity using different econometric approach for an individual country Chang et al [5], or panel data with different countries. The authors find residential electricity consumption to be characterized by a much more irregular behavior, linked to population growth and to the increase in electricity intensity due to the diffusion of air-conditioning appliances Other studies, such as Holtedahl and Joutz [7] and Hondroyiannis [8], found income elasticities of electricity consumption in the residential sector of one or larger for very different countries such as Greece or Taiwan.
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