Journal article

An Experimental Study of Monthly Electricity Demand (In)elasticity

David P Byrne, Andrea La Nauze, Leslie A Martin

The Energy Journal | International Association for Energy Economics (IAEE) | Published : 2021

Abstract

We document substantial rigidity in household electricity demand in response to large price shocks. We partnered with an electricity retailer to run a field experiment in which randomly-selected households received discounts of up to 50% on their total electricity bill or up to 95% off their per unit cost of electricity for a full month. We show that the quantity of electricity consumed was unaffected by these discounts. Exploiting rich billing, smart meter, and survey data, we document responses that are much more inelastic than previously observed in scenarios that raise prices for a few hours or raise or lower prices for indefinitely-long periods of time. Our results hold even among subgr..

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University of Melbourne Researchers

Grants

Awarded by Australian Research Council


Funding Acknowledgements

We thank Yann Burden, Tatyana Deryugina, Koichiro Ito, Erica Myers, David Rapson, and workshop participants at UC Davis, University of Melbourne, Monash, and the Midwest Energy Fest. We acknowledge financial support of the Australian Research Council Linkage Grant Award LP140100099, a University of Melbourne Faculty of Business and Economics Faculty Research Grant, and from the University of Melbourne's Centre for Market Design. All errors, omissions, and views are our own. The Online Appendix for the paper can be downloaded from https://sites.google.com/view/dprbyrne/researchhttps://sites.google.com/view/dprbyrne/research.