On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia

Jorge Barrientos, Esteban Velilla, David Tobón-Orozco, Fernando Villada, Jesús M. López-Lezama

Abstract


On the estimation of the price elasticity of electricity demand in the manufacturing industry of Colombia

Abstract: This paper presents an estimation of the reaction of electricity demand to changes in price levels of forward contracts in the manufacturing industry of Colombia. To that end, a structural vector autoregressive (SVAR) model was developed, considering several economic activities at different voltage levels. The industrial sectors under study showed an electricity demand not significantly sensitive to price variations. However, the food and drink sectors, plastic and rubber manufacturing, as well as retail trade turned out to be more sensitive to price shocks than the chemical industry or textile manufacturing. Such inelasticity could be softened if information concerning prices and quantity demanded were of common knowledge, or if the forward curve were observable.

Key words: electricity markets, forward contracts, price elasticity of demand, SVAR models.

JEL Classification: D43, D61, L13, L43, Q41.

 

Estimación de la elasticidad precio de la demanda de electricidad en la industria manufacturera de Colombia

Resumen: En este artículo se presenta una estimación de la reacción de la demanda a niveles de precios de contratos forward de electricidad en la industria manufacturera de Colombia. Se desarrolló un modelo de vectores autorregresivos estructurales (SVAR) considerando varias actividades económicas a diferentes niveles de tensión. Los sectores industriales bajo estudio no mostraron una demanda de electricidad significativamente sensible a variaciones de precios. Sin embargo, los sectores de alimentos y bebidas, caucho y plástico, así como el sector comercial minorista resultaron ser más sensibles a choques de precios que la industria química o el sector de manufactura de textiles. Dicha inelasticidad podría suavizarse si la información concerniente a precios y cantidades demandadas fuera de conocimiento común, o si la curva forward pudiera ser observable.

Palabras clave: mercados de electricidad, contratos forward, elasticidad precio de la demanda, modelos SVAR.

Clasificación JEL: D43, D61, L13, L43, Q41.

 

L’estimation de l’élasticité-prix de la demande d’électricité dans l’industrie manufacturière colombienne

Résumé: Cet article présente une estimation de la variation dans la demande d’électricité, due à des changements dans les niveaux de prix des contrats d’électricité du type forward, dans l’industrie manufacturière colombienne. Un modèle de vecteurs autorégressifs structuraux (SVAR) a été développé afin de considérer plusieurs secteurs économiques pour des différents niveaux de tension électrique. En général, les secteurs industriels étudiés n’ont pas montré de demande d’électricité sensible aux variations de prix. Cependant, les secteurs de l’alimentation et des boissons, du caoutchouc et plastique, ainsi que le secteur du commerce de détail, se sont avérés être plus sensibles aux chocs des prix par rapport à l’industrie chimique et au secteur textile. Une telle inélasticité pourrait être adoucie si les informations concernant les prix et les quantités demandées d’électricité étaient connues, ou bien si la courbe forward était observable.

Mots-clés: marchés d’électricité, contrats forward, élasticité-prix de la demande, modèles SVAR.

Classification JEL: D43, D61, L13, L43, Q41.


Keywords


electricity markets; forward contracts; price elasticity of demand; SVAR models

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DOI: http://dx.doi.org/10.17533/udea.le.n88a05

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