Abstract
This paper examines the causal relationships in electricity consumption patterns and price using Granger causality analysis. Our methodology implements vector autoregression models while accounting for electricity's nature as an essential resource with low price elasticity. Through Seasonal Autoregressive Integrated Moving Average (SARIMA) modelling and stationarity assessments, we establish that electricity consumption demonstrates significant inelasticity to price fluctuations, with price series integrated of order I(1) and consumption series of order I(2). Our findings reveal a unidirectional Granger causality from consumption to price, while no significant causality exists from price to consumption. These results suggest that consumption behaviour is primarily influenced by structural and seasonal factors rather than price signals. Furthermore the findings of this article contribute to understanding the dynamics of the electricity market and opens a door to understanding the policy formulation of the governmentsduring the transition to renewable energy.