Residential electricity consumption and household characteristics: An econometric analysis of Danish smart-meter data

Households are heterogeneous customers that consume different amounts of electricity for different purposes at different hours of the day. Understanding how the level and timing of electricity consumption is related to household characteristics is important in planning production and grid capacities and in designing policies. Linking Danish smart-meter data for 2017 to detailed household characteristics derived from administrative registers, we analyse how the level and profile of hourly electricity consumption is related to these characteristics. In addition, we examine to what extent having a flat rate for electricity implies cross-subsidies between residential customers in Denmark. We find that both the level and timing of consumption vary significantly with household characteristics, mainly the type of dwelling, its heating technology, its use of electric vehicles, and the number and age of the adults and children who live there, all of which affect the level and timing of consumption. Assuming hourly pricing with constant consumption rates, the average price per kWh paid by different categories of household varies only marginally. That is, the flat rate presently seen by Danish households implies limited cross-subsidies between groups of residential customers. Consequently, introducing real-time pricing for Danish residential customers should not pose serious redistribution concerns and would improve economic efficiency.

Automated summary

Household electricity consumption levels and timing are significantly influenced by household characteristics such as dwelling type, heating technology, use of electric vehicles, and the number and age of household members. Flat rate pricing in Denmark currently shows limited cross-subsidies between residential customer groups, indicating that introducing real-time pricing for Danish residential customers could improve economic efficiency without significant redistribution concerns.