Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/272048 
Year of Publication: 
2023
Publisher: 
ZBW - Leibniz Information Centre for Economics, Kiel, Hamburg
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. While seemingly modest, our results imply that even with limited exposure to real time prices, short-term demand response facilitates decarbonization of the electricity grid by reducing the need for battery storage or backup fossil power by approximately 8%.
Subjects: 
Short-term price elasticity
Electricity markets
Demand response
Instrumental variables
Wind energy
JEL: 
Q41
Q42
older Version: 
Document Type: 
Working Paper

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