Short-run and long-run elasticities of electricity demand in the public sector: A case study of the United States Navy bases

Numerous studies have examined the elasticities of electricity demand—residential as well as commercial and industrial—in the private sector. However, no one appears to have examined the behavior of the public sector demand. This study aims to fill that gap and to provide insights into the electricity demand in the public sector, using the U.S. Navy bases as a case study.; This study examines electricity demand data of 38 Navy activities within the United States for a 16-year time period from 1985 through 2000. The Navy maintains a highly diverse shore infrastructure to conduct its mission and to support the fleet. The types of shore facilities include shipyards, air stations, aviation depots, hospital, and many others. These Navy activities are analogous to commercial or industrial organizations in the private sector. In this study, I used a number of analytical approaches to estimate short-run and long-run elasticities of electricity demand. Estimation using pooled data was rejected because it failed the test for homogeneity. Estimation using the time series data of each Navy activity had several wrong signs for coefficients. The Stein-rule estimator did not differ significantly from the separate cross-section estimates because of the strong rejection of the homogeneity assumption. The iterative Bayesian shrinkage estimator provided the most reasonable results.; The empirical findings from this study are as follows. First, the Navy's electricity demand is price elastic. Second, the price elasticities appear to be lower than those of the private sector. The short-run price elasticities for the Navy activities ranged from −0.083 to −0.157. The long-run price elasticities ranged from −0.151 to −0.769.