Temperature effects on firms’ electricity demand: an analysis of sectorial differences in Spain
EntityUAM. Departamento de Análisis Económico, Teoría Económica e Historia Económica
Serie/Num.Economic analysis working papers series.1/2015
SubjectsSectorial electricity demand; Temperature effect; “cooling” and “heating”; Electricity demand; Economía
Global warming, intermittent production, and efficient use of energy require adequate demand response policies. The price inelasticity of electricity demand represents the main obstacle for developing adequate measures. A potential source of demand inelasticity is the temperature effect ‐ the reaction of electricity demand to variations in temperature. Studies using aggregate data show that temperature‐driven electricity demand is growing in most countries. Using disaggregated data by sectors, we analyze the sectorial breakdown of temperature effects on firms’ electricity demand. In‐depth knowledge of sectorial demand responses to temperature changes is fundamental for improved energy planning. If electricity consumption in a sector heavily reacts to temperature, “flattening” electricity demand will eventually become infeasible. Our findings indicate that in Spain firms’ aggregate electricity demand is rather insensitive to temperature. However, there are marked differences among sectors, with the highest sensitivity found for firms in the service sector.
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