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Estimating residential electricity demand’s response to price policy and income dynamics in China

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Abstract

This paper estimates the residential electricity demand’s response to price policy and income dynamics in China at both national and provincial levels, specifically in Anhui, Guizhou, Zhejiang, Jiangsu, and Jiangxi provinces, using the unbalanced panel partial adjustment model (PAM) and time-series PAM based on monthly data from January 2006 to October 2016. The empirical results show that the income elasticity of demand is inelastic in the short term on the whole while it is elastic in the long term and ranges from 0.807 to 2.371 in different provinces. The own-price elasticity of electricity demand is insignificant in most cases due to the government’s price regulation, leading to that the regulating effect of the electricity price policy, such as the tiered pricing policy, is weak. Overall, the residents’ income and seasonality are the most important driving forces of residential electricity consumption (REC). The price policy for pipeline natural gas has a significant effect on REC, and it would be an effective alternative option to regulate REC in China. This paper recommends reducing the upper limit of REC in each grade under the tiered tariff policy and further promoting the use of energy-efficient household appliances.

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Notes

  1. Due to data unavailability, for Jiangsu Province, the time span of the household electricity consumption data is from January 2003 to October 2016, while the time span of the national-level data and of the other four provinces is from January 2006 to October 2016.

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Funding

Supports from the National Natural Science Foundation of China under Grant No. 72001065, No. 71673266, and No. 71690245; National Key Research and Development Program of China under Grant No.2017YFE0101800; and the Fundamental Research Funds for the Central Universities of China under Grant No. JZ2019HGBZ0179 are acknowledged. All remaining errors are the authors’ own.

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Authors and Affiliations

  1. School of Economics, Hefei University of Technology, Hefei, 230601, China

    Jun-Jun Jia

  2. Center for Energy and Environmental Policy Research, Institutes of Science and Development, Chinese Academy of Sciences, Beijing, 100190, China

    Jin-Hua Xu

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  1. Jun-Jun Jia
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Correspondence to Jin-Hua Xu.

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Highlights

•Residential electricity demand’s elasticity is estimated on monthly frequency.

•The short-term income elasticity is less than 1 while the long-term is greater than

•Residents’ income and seasonality are important driving factors.

•Natural gas price policy could be an effective alternative option to regulate REC.

•The effect of tiered pricing policy on electricity conservation is weak.

Appendix

Appendix

Table 12 Variable definition, data sources, and the means to construct
Full size table
Table 13 Pearson correlation coefficients of HDD variables in five provinces
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Table 14 Pearson correlation coefficients of CDD variables in five provinces
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Table 15 Unit root tests for all time-series data in the model
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Jia, JJ., Xu, JH. Estimating residential electricity demand’s response to price policy and income dynamics in China. Energy Efficiency 14, 65 (2021). https://doi.org/10.1007/s12053-021-09974-9

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