How Much do Households Respond to Electricity Prices? Evidence from Australia and Abroad†

Abstract

In this paper, we review studies to understand how much households change their electricity consumption when there is a price change. Many studies find residential households have long-term and short-run elasticities behaving as economic theory would suggest. Long-run elasticities range from −0.75 to −0.3, and short-run elasticities range from −0.47 to −0.026. Household responsiveness seems to increase when paired with technology. The major gaps in research from the empirical economic literature are how low-income and vulnerable Australian households could be affected by price changes and how Australians respond to within-day variation in prices.