Nonlinear Effects of Extreme Weather on Regional Electricity Demand in Mexico

Abstract

This study examines the non-linear relationship between climate change and electricity demand. In theory, extreme temperatures drive increased electricity consumption while moderate temperatures reduce demand, creating threshold effects that establish nonlinearity. This hypothesis is tested with ARDL regression techniques (Autoregressive Distributed Lags) including autoregressive and quadratic terms. The empirical analysis focuses on Mexico and its regions using monthly data for the period 2002-2019. Non-linear behavior is confirmed for the national series and two thirds of the Mexican regions. The sensitivity of electricity consumption to extreme temperature variations is measured and the threshold values that trigger an accelerated increase in energy demand during periods of intense cold and heat are determined. The results reveal that, at the national level, electricity demand experiences significant increases when temperatures drop below 11.6°C or exceed 30.6°C. These thermal thresholds vary according to the particular climatic characteristics of each region of the country. It is recommended to integrate the regional impacts of climate into energy policies, particularly in electricity supply planning, as this is a key element for sustainable growth.