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Modelling useful energy demand system as derived from basic needs in the household sector

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Abstract

Inter-fuel substitution in the household sector depends on whether their target energy use is similar or not. To account for the effect of end-use application on energy demand, the concept of useful energy is utilized in which energy carriers are grouped according to their end-use applications. Useful energy is assumed as a commodity demanded to satisfy needs. Therefore, it should possess certain characteristics in accordance with the nature of basic needs. These characteristics were investigated through a two-level budgeting system with demographic variables indicating rural and urban households of Iran. The model has been applied to estimate the behavioural parameters such as income and price elasticities of useful energy demand. The estimated values of income and own-price elasticity show that all categories of useful energy are necessities with a relatively inelastic demand. Among them, cooling and non-substitutable electricity has the highest income and own-price elasticity, while lighting and water heating are ranked as the most necessary types of useful energy due to their low-income elasticity. In addition, small values of cross price elasticities support the idea that different types of useful energy are almost independent. Therefore, the results confirm that useful energy demands could be considered as basic needs.

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Notes

  1. The latest data available for aggregate energy consumption are for the year 2010.

  2. See Bhattacharjee and Reichard (2011) for a recent review and classification of factors affecting household energy demand.

  3. Non-substitutable electricity refers to the remaining electrical appliances that households use.

  4. Model for Analysis of Energy Demand

  5. This term has been utilized by Becker to refer to the outputs of household production function (Becker 1965).

  6. The mentioned conditions and specification of useful energy demand (or in some literature, energy services) are expected to hold where there is no energy poverty.

  7. Linear Expenditure System

  8. Constant Elasticity of Substitution

  9. It is defined as the ratio of end-use energy provided by an end-use device to the final energy consumed.

  10. It is defined as the ratio of provided useful energy to the end-use energy consumed. In household sector, availability of useful energy is generally a measure of energy performance in dwellings.

  11. Classification of end-use energy is identical with that of useful energy.

  12. The relevant data have been calculated by authors based on Statistical Consumer Surveys (SCI). The methodology was explained in Methodology section.

  13. In 2007, electricity was sold to households at an average price of 34.4 Rs/MJ while natural gas was 112 Rs/m3 which is roughly equal to 3 Rs/MJ.

  14. Only data on household size are available. Number of families in household is not known. Hence, all data are expressed in unit of households, not families.

  15. Seemingly Unrelated Regression

  16. Please refer to Eq. (6).

Abbreviations

E:

Expenditure elasticity

L:

Likelihood function

p:

Commodity price

pe:

Price of final energy

U:

Utility

x:

Final energy

y:

Quantity variable of either household size or household’s living area

Z:

Commodity

µ :

Expenditure

Av:

Availability of appliance

Pavg:

Average rate of energy consumption

PF:

Average utilization time

α:

Marginal budget share in LES

β:

Subsistence bundle of commodities

ε:

Useful energy availability

η:

Energy efficiency of appliance

i:

Counter on useful energy

j:

Counter on final energy

k:

Counter on appliance type

n:

Household expenditure decile

o:

Counter on household characteristic (household size or living area)

UD:

Useful energy

EN:

Final energy

AIDS:

Almost ideal demand system

CES:

Constant Elasticity of Substitution

LES:

Linear Expenditure System

MAED:

Model for Analysis of Energy Demand

QAIDS:

Quadratic AIDS

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Authors and Affiliations

  1. Mechanical Engineering Department, Sharif University of Technology, P.O. Box 11365-9567, Tehran, Iran

    Zahra A. Barkhordar

  2. Sharif Energy Research Institute (SERI), Sharif University of Technology, P.O. Box 11365-9567, Tehran, Iran

    Yadollah Saboohi

Authors
  1. Zahra A. Barkhordar
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  2. Yadollah Saboohi
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Correspondence to Yadollah Saboohi.

Appendix

Appendix

Table 7 Summary of input data for the second stage budgeting model
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Barkhordar, Z.A., Saboohi, Y. Modelling useful energy demand system as derived from basic needs in the household sector. Energy Efficiency 7, 903–921 (2014). https://doi.org/10.1007/s12053-014-9257-7

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