Modelling household electricity consumption

Deposited with permission of the author. © 2011 Dr. Phillip Martin de la RueA simulation model of household consumption of electricity is constructed taking account of intra-day climate and electricity price changes. The model is extended to endogenise household decisions concerning the stock and characteristics of appliances based on electricity prices and public policy (price subsidies and energy efficiency standards). Illustrative applications of the model are presented, estimating the effects of various tariff plans, regulatory and policy options, and climate scenarios on household electricity consumption and appliance purchase decisions. The model utilises a novel theoretical technique to estimate a matrix of relative intra-day price elasticities for individual households and energy functions (including heating, cooling and lighting). Substantial variation is evident in the intra-day elasticities of demand for electricity between both households and energy functions. A number of conclusions are drawn, however given the limited and non-representative na- ture of the data on which the model is calibrated, these can be treated as illustrative only. The model predicts that the introduction of intra-day pricing of electricity for the residential sector will yield efficiency benefits, reducing consumption during peak periods as the retail price better reflects the cost of supplying electricity. The distributional impact of the introduction of a time of use (TOU) tariff is not uniform across sample households, highlighting potential political difficulties in implementing pricing reform. The regulatory imposition of a price ceiling limits the extent to which energy efficiency benefits can be realised under a TOU tariff. The potential for policy options such as the introduction of minimum appliance energy efficiency standards, a carbon cap and trade scheme, and subsidies for the purchase of energy efficient appliances to reduce medium and long run electricity consumption is illustrated. Increases in temperature predicted for coastal Australia arising from climate change would increase aggregate household electricity consumption if further analysis based on representative data supported the climate response and intra-day price elasticity estimates of this study