Impact of Digitalization in the Energy Sector on Energy Consumption

Abstract

The digital transformation in the energy sector has the potential to change the energy consumption patterns. The adoption of smart energy technologies is not always yielding positive impact on the energy consumption patterns which is highly determinant by the end-users’ behavior. The adoption of energy digitalization and enabling users to easily trace peak consumptions can trigger the motive to conserve energy. However, the prevalence of rebound backfire effect induced by the cost reduction accompanied by the enhanced energy efficiency is probable. This study examines the impact of energy digitalization in a sample of 29 developed countries by utilizing the OLS panel regression model with fixed-effect estimation during the period 1991-2021. The results confirmed the existence of a positive impact where an increase in the energy R&D by 1% yields an increase in energy consumption by 0.0039%. Despite of the limited size of potential rebound, it should be considered critically to avoid undesired policy consequences.