Estimating residential electricity demand in New Zealand: Evidence from a Household Economic Survey

Addressing how electricity pricing affects consumer behavior, particularly across different socioeconomic groups, is essential for formulating effective and equitable energy policies. Using a pseudo-panel methodology, we construct a dataset of 384 cohorts based on household size and regions of residence, derived from six rounds of national-level household consumption surveys between 2006 and 2023 in New Zealand. Both static and dynamic electricity demand models are employed to estimate short- and long-run price and income elasticities, while a quantile regression framework is used to investigate heterogeneity across income and energy use levels. Baseline results show that electricity demand is inelastic, with own-price elasticities ranging from −0.205 to −0.318, and long-run elasticities being larger in magnitude. Quantile regression analysis reveals that low-income, low-use households are the most responsive to electricity price changes and are more likely to consume insufficient energy services at home. An instrumental variable approach addressing potential price endogeneity confirms the robustness of the main estimates. Overall, the findings suggest that universal pricing policies based on average estimates could impose disproportionately regressive impacts on households already experiencing energy hardship. This study provides new evidence on electricity demand responses across diverse household groups, underscoring the importance of policy frameworks that balance efficiency with social equity. • Residential electricity demand in New Zealand is price inelastic in both short and long run. • Long-run price elasticities exceed short-run elasticities, indicating gradual household adjustment. • Demand responses vary substantially across usage and income groups. • Low-income, low-use households are most price-inelastic and likely under-consume energy. • Uniform pricing policies risk regressive impacts and may exacerbate energy hardship.