• Energy Research

Abstract Using a panel data analysis of a newly developed sample of monthly data by state for January 2005 to December 2019, we estimate a series of error correction models for US residential electricity demand postulated to move with electricity price, natural gas price, income, and weather. Our key findings are as follows. First, the short-run own-price elasticity estimate is not statistically different from zero (p-value > 0.8). Second, the long-run own- and cross-price elasticity estimates are −0.054 (p-value = 0.000) and 0.019 (p-value = 0.000) under the double-log specification, smaller in size than the long-run own- and cross-price elasticity estimates of −0.120 (p-value = 0.000) and 0.069 (p-value = 0.000) under the linear demand specification. Third, price elasticity estimates have been shrinking in size over time. Fourth, erroneously ignoring the panel data's cross-sectional dependence tends to more than double the long-run price elasticity estimates. Fifth, mismatching the timing of price information's availability and consumption decision leads to anomalous price elasticity estimates. Finally, our new empirics' key takeaway of low price-responsiveness supports continuation of energy efficiency standards and demand-side management programs.

A large sample of daily electricity consumption and pricing data are available from a pilot study conducted by BC Hydro in British Columbia (Canada) of its residential customers under optional time-varying pricing and remotely-activated load-control devices for the four winter months of November 2007– February 2008. We use those data to estimate the elasticity of substitution r, defined as the negative of the percentage change in the peak-to-off-peak kW h ratio due to a 1% change in the peak-to-off-peak price ratio. Our estimates ofr characterize residential price responsiveness with and without load control during cold-weather months. While the estimates of r sans load control are highly statistically significant (a = 0.01), they are less than 0.07. With load control in place, however, theser estimates more than triple. Finally, we show that time-varying pricing sans load control causes a peak kW h reduction of 2.6% at the 2:1 peak-to-off-peak price ratio to 9.2% at the 12:1 peak-to-off-peak price ratio. Load control raises these reduction estimates to 9.2% and 30.7%.

Abstract China’s ambitious decarbonization strategy disaggregates the national energy conservation target by province. Using panel data of 30 provinces for 1995–2017, we revisit China’s energy-growth nexus that considers the likely cross-section dependence among the provinces within each of China’s three regions. Our key finding is a bidirectional causal relationship of energy (natural log of per capita energy consumption) and income (natural log of per capita real GDP) for the Eastern and Central regions and a unidirectional causal relationship from income to energy for the Western region. The Eastern and Central regions’ bidirectional relationship suggests caution in China’s energy conservation policy which may decelerate these regions’ economic growth. The Western region’s unidirectional relationship suggests promoting energy conservation without adversely affecting this region’s economic growth. Hence, the East and Central regions’ conservation effort should be accompanied by cost-effective development of emissions-free renewable resources like hydro, solar and wind for displacing China’s fossil-fuel consumption.

Motivated by the projected solar and wind capacity additions around the world, we model the energy procurement decision of a load serving entity (LSE) faced with alternatives of solar power purchase agreements (PPAs), wind PPAs, non-renewable energy forward contracts, and spot energy purchases in a wholesale electricity market with uncertain prices. Using a pseudo-data sample of over one million observations, we estimate a translog cost function to find that the LSE’s own-price elasticity estimates range from −1.87 for nighttime spot MWh demands to −13.1 for forward MWh demands. MWh demands are influenced by solar and wind capacity factors, daytime and nighttime retail sales, and spot energy price forecasts. The LSE’s optimal procurement of solar capacity is roughly twice the wind capacity, corroborating the ratios of projected solar and wind capacity additions in regions around the world. If the LSE’s existing energy mix is nearly all renewable, it becomes carbon-free when solar and wind power purchase agreements have declining energy prices or when forward energy price and spot energy price forecasts increase over time. These results imply that piecemeal policy measures can have conflicting outcomes, calling for integrated resource planning under wholesale market competition and price uncertainty.

We use a profit-maximizing model of forward pricing, which revealed that an electricity retailer’s fixed price offer (FPO) contains a large forward premium that encourages vertical integration of a generation company and a retailer. However, vertical integration does not always reduce FPOs, particularly when residential customers are segmented by consumption size and price sensitivity. Hence, a proposed merger of a big generation company and a big retailer requires regulatory scrutiny.

China is a global leader in methanol production volume, while coal is a major feedstock. The country also has the world’s largest commercial coal-to-methanol operations. Coal-based methanol is used widely within China and is a competitive substitute for gasoline. Owing to this, it is plausible that the price of coal may be linked to international crude oil prices, with methanol prices serving as the connecting channel. We add supporting evidence to a recently emerging area of literature and observe statistically significant relationships among the three prices, and, therefore, the influence from international crude oil and methanol prices on the coal price determination in China. This paper investigates the relationships among these prices for the period from January 2010 to December 2019 through spectral Granger causality analysis, alongside more traditional cointegration tests to develop a comprehensive picture of causal association between the price series in both the frequency and time domain. Cointegration is found in our tri-variate system while the frequency domain Granger causality tests reveal the long-run causality in all directions except from crude oil to methanol, thus, emphasizing the structure of coal price dependence. According to the generalized impulse response functions, the coal price reacts positively to shocks in crude oil prices.

Abstract This paper revisits the topic of natural gas market integration across Europe. Against the backdrop of three EU gas directives aimed at creating competition and strengthening market connections, and the move towards hub trading and gas-on-gas pricing in the European markets, we adopt and extend the spillovers index due to Diebold and Yilmaz (2009) to examine the path of market connectivity over the period between 2005:7–2018:12. An initial estimation uncovers what might be deemed a ‘clunky’ evolution in the spillover index. We identify the cause of this, and devise a tilted ‘importance weighting based re-sampling’ rolling window estimation strategy which preserves the underlying evolutionary trend without overly weighting the importance of historic outliers. Our results show that although there are periods of deterioration, the level of market connectivity recovers, producing a generally increasing trend of market integration in our sample period. The connectivity index peaks at around 65%, i.e. a little above halfway through to full connectivity. We conclude that the European natural gas market has achieved a non-trivial, albeit not full, level of integration to-date.

This paper estimates the daily kWh responses on a working weekday of 1326 single-family-home residents who voluntarily participated in a residential optional dynamic pricing (RODP) pilot in the winter-peaking coastal province of British Columbia (BC) in western Canada. Based on the pilot’s operation in November 2007-February 2008, we estimate that the kWh reduction in the peak period of 4-9 pm on a working weekday sans an in-home display (IHD) is: (a) 2.2% to 4.4% at time-of-use tariffs with peak-to-off-peak price ratios of 2.0 to 6.0; and (b) 4.8 to 5.3% at critical peak pricing tariffs with peak-to-off-peak price ratios of 8.0 to 12.0. The IHD approximately doubles these estimated peak kWh reductions. As BC residents already have smart meters with an IHD function, these findings recommend exploring the use of a system-wide RODP program to improve the BC grid’s system efficiency.

The research presented in this paper re-examines the relationship between energy consumption and income for a panel of Asian economies for the period 1971-2018. The Asian economies represent a dynamic, diverse, and interesting set of countries on which to base an examination of these relationships and the tendencies for these economies to be on a path of convergence and integration in their energy consumption and use characteristics. Our convergence analysis provides evidence of convergence in energy intensity among the countries. Panel data methodologies are employed to gain the advantage of increased explanatory power of the econometric analysis. Importantly, we incorporate common factors as a means of accounting for variables beyond the bivariate relationship. The results find support for the flow of causality running from income to energy consumption, albeit with short-run feedback. As a result, current policies aimed at reducing energy intensity and CO2 emissions are not expected to significantly inhibit economic growth. The results are consistent with the seminal paper by Kraft and Kraft (1978). Additionally, we find the long-run income elasticity estimates for the panel double in size when unobserved common factors are excluded.