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The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation

  • Tatyana Deryugina
  • Alexander MacKay
  • Julian Reif
American Economic Journal: Applied Economics
vol. 12, no. 1, January 2020
(pp. 86-114)
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Abstract

We study the dynamics of residential electricity demand by exploiting a natural experiment that produced large and long-lasting price changes in over 250 Illinois communities. Using a flexible difference-in-difference matching approach, we estimate that the price elasticity of demand grows from −0.09 in the first six months to −0.27 two years later. We find similar results with a dynamic model in which usage is a function of past and future prices. Our findings highlight the importance of accounting for consumption dynamics when evaluating energy policy.

Citation

Deryugina, Tatyana, Alexander MacKay, and Julian Reif. 2020. "The Long-Run Dynamics of Electricity Demand: Evidence from Municipal Aggregation." American Economic Journal: Applied Economics, 12 (1): 86-114. DOI: 10.1257/app.20180256

Additional Materials

JEL Classification

  • L94 Electric Utilities
  • L98 Industry Studies: Utilities and Transportation: Government Policy
  • Q41 Energy: Demand and Supply; Prices
  • Q48 Energy: Government Policy
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