In this study a panel type of econometrics model is constructed to estimate the hourly price elasticity of demand for industrial sectors in Korea. A dynamic panel model with fixed effects and random effects are applied for the estimation of the parameters. Then more efficient model is tested with Hausman test statistics. Asymptotic consistency of dynamic panel estimator as the size of time dimension goes infinity in the sample data allow to conduct the empirical analysis.
The model utilizes the hourly electricity demand data obtained from Korea Electric Power Company (KEPCO) for the period of January 1st 2005 to December 31st 2009 (43,824 hours). After data processing, 6,494 customers are available to analysis with their information such as contract type, contract option, industrial sector code, contract size, location, and so on. The contract type and option information decides the price electricity in Time-Of-Use (TOU) tariff schedule. Other than the dependent variable of electricity consumption and independent variable of electricity price, the exogenous variable information - industrial classification, index of industrial production, local temperature and humidity - is also gathered.
The price elasticity of power demand is shown to be negative with its various sizes. The result of the analysis of the TOU pricing system would allow the policy maker to design an appropriate incentive program. Further, this study is important in the sense that it provides essential information for designing the effective Real Time Pricing for the future.
