Estimation of Elasticity Price of Electricity with Incomplete Information

The sharp increase in energy prices and growing concern on environmental issues, among other things, are behind the renewed interest in energy demand estimation. However, there is sparce academic literature that takes the real situation of energy suppliers into account: high quality but incomplete data. In this paper, we propose a useful and rather simple instrument for estimating electricity demand with incomplete and/or imperfect data available to suppliers. In particular, using real data of expenditure and consumption of electricity, we employ a model of random effects for panel data in order to estimate residential and industrial electricity demand in Spain.