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Modelling uk sub-sector industrial energy demand

Agnolucci, PA; De Lipsis, V; Arvanitopoulos, TA; (2018) Modelling uk sub-sector industrial energy demand. Energy Economics , 67 pp. 366-374. 10.1016/j.eneco.2017.08.027. Green open access

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Abstract

The importance of considering homogenous economic agents when estimating energy demand functions is recognized in the literature, but so far data availability problems have explained the prevalence of empirical analyses only at an aggregate level. Motivated by the goal of developing the new industrial module to be adopted by the UK government Department of Business, Energy and Industrial Strategy (BEIS) for their econometric Energy Demand Model, we propose the first cointegration analysis that provides evidence on energy demand elasticities with respect to economic activity and energy price at a disaggregated industrial level. While the average of our estimates are comparable to those of the existing literature on the industrial sector as a whole, we find that there is considerable heterogeneity in relation to the long-run impact of economic activity and energy price on energy consumption, as well as to the speed with which firms re-adjust their equilibrium demand of energy in response to economic shocks. Finally, we learn that long-run disequilibria are tackled through altering the level of energy consumption rather than economic activity, a conclusion that has important implications for policy analysis.

Type: Article
Title: Modelling uk sub-sector industrial energy demand
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.eneco.2017.08.027
Publisher version: https://doi.org/10.1016/j.eneco.2017.08.027
Language: English
Additional information: © 2017 The Author(s). Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).
Keywords: Energy demand, Energy consumption, Elasticities, Industrial, Subsectors, Industrial sector, Cointegration
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Bartlett School Env, Energy and Resources
URI: https://discovery.ucl.ac.uk/id/eprint/1572973
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