The Price Elasticity of Electricity Demand in the United States: A Three-Dimensional Analysis

Paul Burke, Ashani Abayasekara

    Research output: Contribution to journalArticle

    Abstract

    In this paper we employ a dataset of three dimensions - state, sector, and year - to estimate the short- and long-run price elasticities of state-level electricity demand in the United States. Our sample covers the period 2003-2015. We contribute to the literature by employing instrumental variable estimation approaches, using the between estimator, and pursuing panel specifications that enable us to control for multiple dimensions of fixed effects. We conclude that state-level electricity demand is very price inelastic in the short run, with a same-year elasticity of -0.1. The long-run elasticity is near -1, larger than often believed. Among the sectors, it is industry that has the largest long-run price elasticity of demand. This appears to in part be due to electricity-intensive industrial activities clustering in low-price states.
    Original languageEnglish
    Pages (from-to)123-145pp
    JournalThe Energy Journal
    Volume39
    Issue number2
    DOIs
    Publication statusPublished - 2018

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