Price elasticity of demand in the EPEX spot market for electricity-New empirical evidence

- We investigate price elasticity of demand in a spot market for electricity.
- We use hourly data of the EPEX day-ahead market for Germany and Austria.
- We argue that wind speed is an appropriate instrumental variable for market price.
- In the period from 2010 to 2014 the estimated price elasticity is about −0.43.

This paper provides estimates for the price elasticity of demand in the European Power Exchange (EPEX) day-ahead market for electricity. An institutional change in the year 2010 allows us to use wind speed as an instrumental variable for hourly spot market prices in order to deal with potential endogeneity problems. The average price elasticity of demand covering the years 2010-2014 is about −0.43 and our results point to a decline in its absolute value over time.