Hot Weather and Hourly Electricity Demand in Italy

Power generation is a major source of greenhouse gas emissions, and is in turn likely to be heavily affected by climate change. Earlier analyses have shown that in Southern Europe, including Italy, there is a V-shaped relationship between temperature and electricity usage. Higher temperatures were found to lead to sharp increases in electricity usage. But those analyses were based on electricity delivered to all sectors (residential, commercial, and industrial), and cooling demand is likely to be driven primarily by the latter two. In this paper, we use hourly electricity demand from a sample of Italian residences over a full year to examine how sensitive residential demand is to temperature. Our regression model includes a rich set of household-by-time fixed effects to control for dwelling characteristics and equipment, family composition, work and business schedules, demand for lighting, and seasonal habits other than temperature. We find that demand stays within a relatively narrow range (and is thus relatively flat) up to temperatures of about 23° C, and increases sharply with temperature thereafter. We perform various checks to see if this shape varies across market zones, household income, and ownership of electrical appliance. We find that temperature accounts for a very small share of daily electricity demand. Only on exceptionally hot summer days (as in an exercise where we “assign” to the sample the same temperature as in one of the hottest summers on record, that of 2003) can temperature account for 12% of hourly electricity use