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The impact of the energy price crisis on GB consumers : a difference-in-difference experiment

Author

Listed:
  • Ajayi, Victor

    (Energy Policy Research Centre, University of Cambridge)

  • Andrew Burlinson, Andrew

    (University of Sheffield)

  • Giulietti, Monica

    (Nottingham University Business School)

  • Waterson, Michael

    (University of Warwick & CAGE research centre)

Abstract
In April 2022, consumers in Great Britain (GB) witnessed a 54% increase in the energy price cap, as a result of Russia’s invasion of Ukraine on February 24th, which sent wholesale gas prices spiralling across Europe. We leverage high-frequency data collected by the Smart Energy Research Lab, a representative panel containing daily gas and electricity data for around 13,000 households in Great Britain between January 2021 and December 2023 to investigate the implications. We exploit several datasets linked to the panel data which include time-varying and cross-sectional information. We rely on two price shocks : 1) in October 2021 a wave of energy retail suppliers leaving the industry. At this time over two million consumers on fixed contracts were forced to join a new supplier and pay a variable tariff, and 2) these consumers were exposed to a second price shock caused by the Ukraine-Russia conflict which fed through April 2022’s energy price cap. Exploiting this pseudo-natural experiment, we use a difference-in-difference framework to estimate average treatment effects on this group of consumers and find that they would have consumed an additional 10 percentage points more electricity and 16 percentage points more gas had their prices remained fixed. These estimates are robust to a battery of robustness checks and point towards a significant loss in welfare for consumers on variable tariffs in the early stages of the energy price crisis

Suggested Citation

  • Ajayi, Victor & Andrew Burlinson, Andrew & Giulietti, Monica & Waterson, Michael, 2024. "The impact of the energy price crisis on GB consumers : a difference-in-difference experiment," The Warwick Economics Research Paper Series (TWERPS) 1523, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1523
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    References listed on IDEAS

    as
    1. Fetzer, Thiemo & Gazze, Ludovica & Bishop, Meena, 2022. "How large is the energy savings potential in the UK?," The Warwick Economics Research Paper Series (TWERPS) 1437, University of Warwick, Department of Economics.
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    5. Braakmann, Nils & Dursun, Bahadir & Pickard, Harry, 2023. "Energy Price Shocks and the Demand for Energy-Efficient Housing: Evidence from Russia's Invasion of Ukraine," IZA Discussion Papers 15959, Institute of Labor Economics (IZA).
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    More about this item

    Keywords

    Difference-in-differences ; energy consumption ; energy crisis JEL Codes: L94 ; E31 ; D12 ; I19;
    All these keywords.

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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