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How aggregate electricity demand responds to hourly wholesale price fluctuations

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  • Hirth, Lion
  • Khanna, Tarun M.
  • Ruhnau, Oliver

Abstract

Electricity needs to be consumed at the very moment of production, leading wholesale prices to fluctuate widely at (sub-)hourly time scales. This article investigates the response of aggregate electricity demand to such price variations. Using wind energy as an instrument, we estimate a significant and robust short-term price elasticity of about −0.05 in Germany and attribute this to industrial consumers. As the share of consumption that is exposed to real-time prices (currently less than 25%) expands, we expect the aggregated price elasticity to grow.

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  • Hirth, Lion & Khanna, Tarun M. & Ruhnau, Oliver, 2024. "How aggregate electricity demand responds to hourly wholesale price fluctuations," Energy Economics, Elsevier, vol. 135(C).
    • Handle: RePEc:eee:eneeco:v:135:y:2024:i:c:s0140988324003608
    DOI: 10.1016/j.eneco.2024.107652
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