Elasticity estimation and forecasting: An analysis of residential electricity demand in Brazil

Spatiotemporal models to estimate electricity demand are scarce in the existing literature. In this paper, we compare three models to estimate elasticities and forecast demand for residential electricity in Brazil. The Dynamic Spatial Durbin Model presented the best goodness of fit, with results that confirm the need to consider spatial dependence in the Brazilian regions. The results showed temporal inertia, inelasticity of demand concerning price and income, and a significant impact of the temperature and the number of households connected to the grid. We conclude that omitting the spatiotemporal dynamic could lead to bias in the models used by Brazilian utilities. •Electricity demand in Brazilian residential sector is spatially correlated.•Among three panel data models, the dynamic SDM obtained the best adjustment.•Electricity demand is inelastic in relation to price and income in Brazil, in short term.•Spatiotemporal models must be used to estimate the electricity demand in Brazil.