• Focus Area Regional Energy Markets Regional Energy Markets
  • Type Discussion paper
  • Date 14 February 2019


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.


Walid Matar

Research Fellow Walid works on modeling energy systems. He is developing or has developed the following components of the KAPSARC Energy Model… Walid works on modeling energy systems. He is developing or has developed the following components of the KAPSARC Energy Model (KEM): electric power generation, oil refining, petrochemicals and fertilizers, cement production, and iron and steel. He is also working on a bottom-up residential electricity use framework that merges microeconomics with the physical laws governing electricity use.


  • Energy Systems Modeling
  • Optimization
  • Electricity Prices
  • Energy Efficiency and the Interdisciplinary Connection Between Energy Economics and Engineering

Publications See all Walid Matar’s publications

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