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OUTLINE

An ADL Model for Electricity and Natural Gas Demand in Colorado Leila Dagher , PHD American University of Beirut. OUTLINE. Introduction Literature Review Model Data and Methodology Results Conclusions. INTRODUCTION. Primary Goal: estimate dynamic price elasticities .

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OUTLINE

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  1. An ADL Model for Electricity and Natural Gas Demand in ColoradoLeila Dagher, PHDAmerican University of Beirut

  2. OUTLINE Introduction Literature Review Model Data and Methodology Results Conclusions

  3. INTRODUCTION Primary Goal: estimate dynamic price elasticities. Secondary Goals End-use impact Price elasticity stability Correct price variable

  4. INTRODUCTION Elasticities are used by utilities and government agencies for: • Forecasting • Policy making There is a renewed interest in elasticities as a result of • the increased concern in energy pollution • the rise in energy prices.

  5. INTRODUCTION • Capital Intensive → Huge Savings • Elasticities are region specific • Existing estimates for Colorado are inconsistent with economic theory • Stability of estimates

  6. Xcel Energy Service Territory Xcel Energy Service Territory

  7. Electricity NaturalGas

  8. LITERATURE REVIEW

  9. LITERATURE REVIEW • Omission of standard errors especially for the LR elasticities • Wide-ranging estimates • Consumer sectors • Sample periods • Modeling variables • Level of analysis • Modeling methods and data types

  10. DEMAND MODEL ADL

  11. DEMAND MODEL

  12. DATA AND METHODOLOGY Unit-root testing Co-integration testing Multicollinearity Data were averaged and logged Deflator CO CPI Lagged prices Frequency conversion Customers variables were smoothed using an IV

  13. ESTIMATION ISSUES • Spurious Regression • Statistical Inference • Price Endogeneity • Inconsistent Estimates

  14. METHODOLOGY • OLS regression and choose the ARDL model that has uncorrelated errors while optimizing the SIC. • T and F statistics on this model are valid

  15. METHODOLOGY • Lag selection • Residual Diagnostics • Saturation/efficiency indices • Test for model and coefficient stability and price asymmetries • Monthly bill • Dynamic elasticities

  16. RESULTSElectric Small Commercial

  17. RESULTSElectric Small Commercial

  18. RESULTSElectric Small Commercial

  19. RESULTSSummary Table

  20. SENSITIVITY ANALYSIS • Data aggregation • Seasonal differencing • Different models • Lag selection • Selection criterion • Sample periods

  21. CONCLUSIONS & IMPLICATIONS Demand is highly inelastic Surcharges for DSM or RE Customers do not respond to joint bill LR range DE useful tool for end users

  22. THANK YOU!

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