Time-of-use pricing and electricity demand response: evidence from a sample of Italian industrial customers

The introduction of real time pricing in many wholesale market as well as the liberalisation process involving the retail market poses the attention over the measurement of demand response to time differentiated price signals. This paper shows an example of how to estimate elasticities of substitution across time using a sample of Italian industrial customers facing time-of-use (TOU) pricing schemes. The model involves the estimation of a nested constant elasticity of substitution (CES) input demand function, which allows estimating substitutability of electricity usage across hourly intervals within a month and across different months.