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Abstract

Energy economists are interested in how a change in electricity prices prompts a response by way of end-user power demand. It is difficult to estimate price elasticities statistically if historical prices are low and change infrequently, especially in the short run. This paper extends a previous analysis by Matar (2018) that explored the merger of a residential building energy model and a utility maximization component by incorporating more demand-reducing measures within a utility-maximization framework for households. The framework is informed by the physical equations that govern how electricity is consumed. The measures considered are:

  • Independently adjusting the thermostat set-point in the spring and fall, and during the peak and off-peak hours in the summer.
  • Turning off lights.
  • Switching off consumer electronics.

The study calibrates the physical component for a dwelling in Saudi Arabia. Domestic electricity tariffs in the – tiered – progressive pricing structure were partially raised in 2018. In addition to those increases, the response to other electricity pricing schemes is analyzed: time-of-use and real-time prices. The paper shows that for a household with a low preference for electricity, the 2018 price increases do warrant an adjustment in indoor temperature in the hot summer months and lower electricity use for consumer electronics. For a typical dwelling in Saudi Arabia, the response measure that is most exercised is thermostat set-point adjustments. A subdued response is found for households that have adopted higher energy efficiency or have a high preference for electricity.

Authors

Walid Matar

Walid Matar

Senior Research Associate Walid is a senior research associate developing energy systems models.

Expertise

  • Modeling energy systems
  • energy use and efficiency in Saudi Arabia
  • and the interdisciplinary connection between energy economics and engineering

Publications See all Walid Matar’s publications

Households’ Demand Response to Changes in Electricity Prices: A Microeconomic-Physical Approach

Households’ Demand Response to Changes in Electricity Prices: A Microeconomic-Physical Approach

Energy economists are interested in how a change in electricity prices prompts a response by…

February 14, 2019
The Economics of Renewable Energy in the Gulf

The Economics of Renewable Energy in the Gulf

Energy economists are interested in how a change in electricity prices prompts a response by…

October 17, 2018
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