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Electricity Demand in Wholesale Italian Market

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  • Simona Bigerna
  • Carlo Andrea Bollino

Abstract

In this paper we pursue two objectives: firstly we construct a theory based behavioral model of electricity demand in the Italian market; secondly we measure demand elasticity at hourly level, directly from consumer behavior. This is a novel approach providing the first attempt in the literature to estimate demand elasticity using individual demand bid data in the Italian Power Exchange (IPEX). Econometric estimation allows us to identify robust results, showing that elasticity varies significantly with: time of the day; day of the week; season of the year; pattern of line congestion; as well as according to the level of equilibrium price. This has meaningful policy implications: fostering more competition on the supply side could yield lower equilibrium prices and proportionately much higher quantities, for a lower offer curve shifted to the right would intersect a flatter portion of the demand curve.

Suggested Citation

  • Simona Bigerna & Carlo Andrea Bollino, 2014. "Electricity Demand in Wholesale Italian Market," The Energy Journal, , vol. 35(3), pages 25-46, July.
    • Handle: RePEc:sae:enejou:v:35:y:2014:i:3:p:25-46
    DOI: 10.5547/01956574.35.3.2
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    References listed on IDEAS

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    1. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    2. Marvin J. Horowitz, 2007. "Changes in Electricity Demand in the United States from the 1970s to 2003," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 93-120.
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