Estimation of elasticity price of electricity with incomplete information

The sharp increase in energy prices and growing concern for environmental issues, among other things, are behind the renewed interest in energy demand estimation. However, there is scarce academic literature that takes real situation of energy suppliers into account: high quality but incomplete data. In this paper, we propose a useful and rather simple instrument for estimating electricity demand with the incomplete and/or imperfect data currently available to suppliers. In particular, using real expenditure and consumption data on electricity, we employ a model of random effects for panel data to estimate residential and industrial electricity demand in Spain.

Research Highlights► This paper studies short-term electricity demand in the presence of incomplete information. ► Elasticity price of electricity is estimated for Spanish households and companies. ► The article finds a certain relationship between price elasticity of electricity and household income, but no relationship between elasticity and value added by sector of activity.