Macroeconomic, Institutional, and Environmental Determinants of Electricity Consumption in the Euro Area: Evidence from Panel Data Analysis

Understanding the determinants of electricity consumption is essential for designing effective economic and energy policies in advanced economies. This study examines the macroeconomic, institutional, and environmental factors influencing electricity consumption in 19 Euro Area countries during 2006–2024. Using a balanced panel dataset and a fixed-effects regression model, the analysis examines the associations between electricity consumption and GDP per capita, manufacturing value added, regulatory quality, electricity prices, renewable energy share, and heating degree days. The results indicate that GDP per capita, manufacturing value added, and regulatory quality are positively associated with electricity consumption, suggesting that higher levels of economic development, industrial activity, and institutional quality are associated with higher electricity demand. In contrast, electricity prices and renewable energy are negatively associated with electricity consumption, highlighting the importance of market incentives and structural changes related to the energy transition. Heating degree days exhibited the strongest estimated association with electricity consumption, highlighting the importance of climatic conditions across the Euro Area. The study contributes to the energy economics literature by providing an integrated assessment of economic, institutional, and environmental drivers of electricity consumption within a highly integrated economic region. The findings offer relevant implications for policymakers seeking to balance economic growth, energy transition objectives, and long-term electricity demand management.