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. In this paper, we test 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. We find that the price sensitivity is higher among households with higher educational attainment and overall electricity consumption, but lower among those aged 35 to 54.