Working Papers present research work by both Danmarks Nationalbank’s employees and our partners. Working Papers are primarily targeted at professionals and people with an interest in central banking research as well as economics and finance in a broader sense.
Price Response in Residential Electricity Demand: Evidence from Danish Smart Meter Data
Real-time and time-of-use electricity pricing is based on the premise that consumers reduce demand when prices are high. This paper tests this assumption empirically, using a large, high-frequency smart meter dataset from Denmark, estimating the short-run (hourly) price elasticity of electricity demand at the household level. Although most households show no significant responsiveness to price signals, we find that nearly one third reduce their consumption significantly when prices rise. On average, a one Danish Krone increase in electricity prices leads to a 2.6% decrease in demand. By linking smart meter data to administrative records, we further examine how price responsiveness varies across socio-demographic groups.