Elasticity of electricity demand - GDP in 2016

The comparison between the demand for electricity and the gross domestic product (GDP) provides information on the electricity consumption required to reach a level of economic activity.

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Elasticity is an economic concept that allows the percentage variation of one variable in relation to another to be quantified. The comparison between two variables such as electricity demand and gross domestic product (GDP) provides information on the electricity consumption necessary to reach a level of economic activity. This relationship can be calculated at a regional level, by country or by geographical area and, consequently, it is used by companies and governments as an additional information variable in the decision-making process regarding future strategies and actions.

When elasticity between both magnitudes is greater than 1, it means that demand has grown more than GDP, which can happen during periods of economic expansion depending on the level of development.

Historically, demand for electricity in Spain increased more than GDP until 2008, the year as of which both demand and GDP fell, but demand fell more than GDP. In the last two years, the values of both have increased again, but demand is increasing at a lower rate than GDP.

In 2016, electricity demand in Spain grew by 0.6% compared to the previous year, while GDP showed a variation of 3.2% in the same period, resulting in an elasticity between both magnitudes of 0.2, much lower than the figure of 0.7 registered in 2015, indicating a high degree of decoupling between the evolution of this economic magnitude and electricity demand, and in any event, a figure quite out of line with elasticities greater than 1 (demand growth greater than GDP growth) registered during the period of economic expansion.

The behaviour of this magnitude in all the European Union countries shows, with an average elasticity of 0.5 in the EU, a certain degree of decoupling between both magnitudes, although above the substantially lower value registered in Spain in 2016, which ranked 19th in terms of elasticity value.

In the five major EU economies (Germany, France, the United Kingdom, Italy and Spain), the elasticity of this group of countries shows a high spread, ranging between a maximum elasticity in France of 1.4 and a minimum of - 2.0 in Italy, which registered a decline in demand of 1.9% with GDP growth of 0.9% in 2016.

The situation of Spain in this set of countries is more aligned with Germany, which in this period had an elasticity of 0.4, showing GDP and demand growth of 1.1% and 0.7% respectively.

Also within this group of countries, noteworthy is the behaviour of this variable in the United Kingdom, in which the weight of the services sector is quite high, and that in 2016 had an elasticity of - 0.9, this being the fourth consecutive year in which this situation happens.

 

 

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