Affordable, reliable electricity is essential for productive, healthy and thriving communities. To achieve this goal, decision-makers need to be able to understand and measure how electricity consumers see and respond to price signals.
Price responsiveness informs utility forecasts of load growth and peak demand, regulatory evaluations of investments and rate structures and government analyses of energy policies and their impacts.
A new report from Duke University experts presents updated estimates of one measure of price responsiveness in the U.S. residential electricity market—the price elasticity of demand for electricity. Published by the Nicholas Institute for Energy, Environment & Sustainability, the report also explores how price elasticity varies across all 50 states.
Key takeaways from the report include:
1. National residential electricity demand is inelastic on average, both in the short and long run. On a month-to-month basis, the authors found a 10% increase in electricity prices is associated with only a 1.3% decrease in consumption nationally. Over the longer term, the same increase in prices translates to nearly double the decrease in consumption (2.4%), indicating consumers are more responsive over time but still relatively inelastic.
2. The national estimates mask significant variability in price elasticity at the state level. States like Michigan, New York and Alabama exhibit no statistically significant response to price changes. On the other end of the spectrum, Utah, Nebraska and North Carolina are far more responsive, each decreasing electricity consumption roughly 9% in response to a 10% increase in prices.
3. States show wide variation in price elasticity even within the same region or electricity market. This suggests that state-specific factors—not just climate or market structure—may play a significant role in shaping consumer price responsiveness. The authors cite several potentially relevant factors for further research, including: local government policy and demographics, rate transparency, the availability of substitute sources or providers of electricity, income distribution and the proportion of residential renters versus owners.
Recognizing and understanding the variation in price responsiveness across the country is crucial for effective rate design, targeted energy programs and market regulation to improve affordability and efficiency in residential electricity markets, the authors write.
The report was authored by Ben Weintraut, a Ph.D. candidate in environmental economics at Duke University, and Nicholas Institute experts Eric Parajon, Trey Gowdy and Jackson Ewing.
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CITATION: Weintraut, B., E. Parajon, T. M. Gowdy, and J. Ewing. 2025. State-Level Heterogeneity in the Price Elasticity of Demand for Residential Electricity. NI R 25-12. Durham, NC: Nicholas Institute for Energy, Environment & Sustainability, Duke University. https://nicholasinstitute.duke.edu/publications/state-level-heterogeneity-price-elasticity-demand-residential-electricity.
For media inquiries, contact the Nicholas Institute communications team at ni-comm@duke.edu.
