Econometric analysis of factors influencing electricity consumption in Spain: Implications for policy and pricing strategies

Abstract

This study employs a comprehensive database of Spanish homes and econometric modeling to assess the factors influencing electricity consumption in Spain. Using panel data covering the period from 1998 to 2023, we analyzed the average yearly electricity usage across the 18 Spanish regions. Our findings reveal that fluctuations in electricity prices have remained the primary driver of consumption over this period. The price elasticity of demand has been exceptionally high, exceeding levels observed in earlier research and periods. Additionally, factors such as income, hours of sunlight, and temperature fluctuations positively influence electricity usage, albeit to a lesser extent than household and family characteristics (e.g., whether a single parent heads the household or if it includes foreign residents). There is no significant correlation between demand and factors such as the age or employment status of family members. Based on these findings, policy actions that target power pricing (e.g., price-based instruments) are likely to be the most effective in reducing electricity consumption.

Keywords

• Household electricity consumption
• Pricing elasticities
• Panel data