TY - JOUR
T1 - Price Responsiveness of Residential Demand for Natural Gas in the United States
AU - Li, Raymond
AU - Woo, Chi Keung
AU - Tishler, Asher
AU - Zarnikau, Jay
N1 - Publisher Copyright:
© 2022 by the authors. Licensee MDPI, Basel, Switzerland.
PY - 2022/6/1
Y1 - 2022/6/1
N2 - While price responsiveness of residential demand for natural gas has important implications on resource planning and energy modelling, its estimates from prior studies are very diverse. Applying panel data analysis and five parametric specifications to monthly data for the lower 48 states in 1990–2019, we estimate own-price elasticities of residential demand for natural gas in the United States (US). Using results from cross-section dependence (CD) test, panel unit root tests, panel time-series estimators, and rolling-window analysis, we document: (1) the statistically significant (p-value ≤ 0.05) static own-price elasticity estimates are −0.271 to −0.486, short-run −0.238 to −0.555 and long-run −0.323 to −0.796; (2) these estimates vary by elasticity type, sample period, parametric specification, treatment of CD and assumption of partial adjustment; (3) erroneously ignoring the highly significant (p-value < 0.01) CD shrinks the size of these estimates that vary seasonally, regionally, and nonlinearly over time; and (4) residential natural gas shortage costs decline with the size of own-price elasticity estimates. These findings suggest that achieving deep decarbonization may require strategies that do not rely solely on prices, such as energy efficiency standards and demand-side-management programs. Demand response programs may prove useful for managing natural gas shortages.
AB - While price responsiveness of residential demand for natural gas has important implications on resource planning and energy modelling, its estimates from prior studies are very diverse. Applying panel data analysis and five parametric specifications to monthly data for the lower 48 states in 1990–2019, we estimate own-price elasticities of residential demand for natural gas in the United States (US). Using results from cross-section dependence (CD) test, panel unit root tests, panel time-series estimators, and rolling-window analysis, we document: (1) the statistically significant (p-value ≤ 0.05) static own-price elasticity estimates are −0.271 to −0.486, short-run −0.238 to −0.555 and long-run −0.323 to −0.796; (2) these estimates vary by elasticity type, sample period, parametric specification, treatment of CD and assumption of partial adjustment; (3) erroneously ignoring the highly significant (p-value < 0.01) CD shrinks the size of these estimates that vary seasonally, regionally, and nonlinearly over time; and (4) residential natural gas shortage costs decline with the size of own-price elasticity estimates. These findings suggest that achieving deep decarbonization may require strategies that do not rely solely on prices, such as energy efficiency standards and demand-side-management programs. Demand response programs may prove useful for managing natural gas shortages.
KW - Cross-section dependence
KW - Panel data analysis
KW - Price elasticity
KW - Residential natural gas demand
UR - http://www.scopus.com/inward/record.url?scp=85135255887&partnerID=8YFLogxK
U2 - 10.3390/en15124231
DO - 10.3390/en15124231
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AN - SCOPUS:85135255887
SN - 1996-1073
VL - 15
JO - Energies
JF - Energies
IS - 12
M1 - 4231
ER -
