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On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia

Author

Listed:
  • Barrientos, Jorge
  • Velilla, Esteban
  • Tobón Orozco, David
  • Villada, Fernando
  • López Lezama, Jesús M.

Abstract

This paper presents an estimation of the reaction of electricity demand to changes in price levels of forward contracts in the manufacturing industry of Colombia. To that end, a structural vector autoregressive (SVAR) model was developed, considering several economic activities at different voltage levels. The industrial sectors under study showed an electricity demand not significantly sensitive to price variations. However, the food and drink sectors, plastic and rubber manufacturing, as well as retail trade turned out to be more sensitive to price shocks than the chemical industry or textile manufacturing. Such inelasticity could be softened if information concerning prices and quantity demanded were of common knowledge, or if the forward curve were observable. Resumen En este artículo se presenta una estimación de la reacción de la demanda a niveles de precios de contratos forward de electricidad en la industria manufacturera de Colombia. Se desarrolló un modelo de vectores autorregresivos estructurales (SVAR) considerando varias actividades económicas a diferentes niveles de tensión. Los sectores industriales bajo estudio no mostraron una demanda de electricidad significativamente sensible a variaciones de precios. Sin embargo, los sectores de alimentos y bebidas, caucho y plástico, así como el sector comercial minorista resultaron ser más sensibles a choques de precios que la industria química o el sector de manufactura de textiles. Dicha inelasticidad podría suavizarse si la información concerniente a precios y cantidades demandadas fuera de conocimiento común, o si la curva forward pudiera ser observable.

Suggested Citation

  • Barrientos, Jorge & Velilla, Esteban & Tobón Orozco, David & Villada, Fernando & López Lezama, Jesús M., 2018. "On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia," Revista Lecturas de Economía, Universidad de Antioquia, CIE, issue 88, pages 155-182, January.
    • Handle: RePEc:col:000174:016027
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    References listed on IDEAS

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    Cited by:

    1. Devkota, Laxmi P. & Bhattarai, Utsav & Khatri, Pawan & Marahatta, Suresh & Shrestha, Dibesh, 2022. "Resilience of hydropower plants to flow variation through the concept of flow elasticity of power: Theoretical development," Renewable Energy, Elsevier, vol. 184(C), pages 920-932.
    2. Jesús M. López-Lezama & David Tobón-Orozco & Esteban Velilla & Jorge Barrientos & Fernando Villada, 2018. "Long-term seasonal forwards in electricity generation markets: an application to Colombia," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, vol. 37(74), pages 287-314, July.
    3. David Rios & Alex Perez & Jaime Carabali & Luis Meneses, 2024. "Poder de mercado y eventos climáticos adversos en un mercado de electricidad hidro-dominado," Borradores de Economia 1266, Banco de la Republica de Colombia.
    4. Mariano González-Sánchez & Juan Luis Martín-Ortega, 2020. "Greenhouse Gas Emissions Growth in Europe: A Comparative Analysis of Determinants," Sustainability, MDPI, vol. 12(3), pages 1-22, January.
    5. Muhammad Tariq & Aneesa & Farah Khan, 2019. "The Effects of Social Protection Program on Food Consumption and Poverty in Khyber Pakhtunkhwa, Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 11(1), pages 55-82, March.
    6. Alex Perez & Jaime Carabali & Luis Meneses, 2022. "Pass-through in Colombia s Unregulated Retail Electricity Market," International Journal of Energy Economics and Policy, Econjournals, vol. 12(4), pages 575-583, July.

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    More about this item

    Keywords

    mercados de electricidad; contratos forward; elasticidad precio de la demanda; modelos SVAR;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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