Electricity demand in a changing climate

Original Article

Abstract

Our interest is in electricity demand and the temperature aspects of climate change. Electricity consumption is of interest both from the perspectives of adaptation to climate change and emission reductions. We study the relationship between European electricity consumption and outdoor temperature and other variables, using a panel data set of 31 countries. Apart from providing a rare quantitative window into adaptation, the study contributes demand system parameters with respect to price and income. The results suggest that weather has a statistically significant effect on electricity demand, with effects that are of plausible magnitude. In a simulation of climate change for the next 100 years—other factors held constant—we find that the demand for heating will decrease in Northern Europe while the demand for cooling will increase in Southern Europe. In countries like Cyprus, Greece, Italy, Malta, Spain, and Turkey the net effect of increased cooling outweighs decreased heating consumption whereas in most of Europe the opposite holds. The largest estimated partial impact is 20%, which predicted increase in adaptive consumption for Turkey and decrease in adaptive consumption for Latvia. Estimated elasticities with respect to income and price are 0.8 and minus 0.2 respectively: plausible in the light of the literature. As a discussion item, we add that electricity consumption changes due to temperature change likely will be small compared to those due to other factors, such as changes in income, demography and technology. The study does not include effects of climate change other than through electricity consumption.

Keywords

Adaptation Climate change Elasticities Electricity demand Europe Mitigation 

Notes

Acknowledgement

This research was financed by the Norwegian Research Council under the Climate Change Impacts in the Electricity Sector (CELECT) project and the European Union under the Adaptation and Mitigation Strategies: Supporting European Climate Policy (ADAM) project. We benefited from the assistance and comments of many individuals. We are especially grateful to Rasmus Benestad for processing the climate data and Lynn Nygaard for editorial assistance. We also thank, in alphabetic order, Asbjørn Aahaiem, Bedru Balana, Eirik Førland, Rolf Golombek, Timo Goeschl, Martin Jakob, Svenn Jensen, Steffen Kallbekken, Nathan Rive, Håkon Sælen, Kjetil Storesletten, Asbjørn Torvanger, Hege Westskog, and seminar participants at the Økonomi Fagdagen of CICERO, Ragnar Frisch Center for Economic Research, and the 17th Annual Conference of the European Association of Environmental and Resource Economists in VU University in Amsterdam. As always, the authors are solely responsible for any errors or omissions.

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Copyright information

© Springer Science+Business Media B.V. 2010

Authors and Affiliations

  1. 1.Norwegian School of Economics and Business AdministrationBergenNorway
  2. 2.Center for International Climate and Environmental Research-OsloOsloNorway

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