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Income and price elasticities of electricity demand in Australia: Evidence of state‐specific heterogeneity

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  • Gan‐Ochir Doojav
  • Kaliappa Kalirajan

Abstract

This paper estimates country‐wide and state‐level income and price elasticities of electricity demand in Australia for the period 1999Q1–2013Q2 using the National Electricity Market data and the autoregressive‐distributed lag model. The results suggest that the long‐run income and price elasticities are inelastic and are statistically significant with theoretically consistent signs. The country‐wide income and price elasticities are estimated to be 0.41 and −0.38, respectively. It is also found that there exists state‐specific heterogeneity in both speed and magnitude of the electricity consumption adjustment in response to changes in income and electricity price. These results have important policy implications, including the need to use state‐specific elasticities in the scenario analysis of the energy pricing policy.

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  • Gan‐Ochir Doojav & Kaliappa Kalirajan, 2019. "Income and price elasticities of electricity demand in Australia: Evidence of state‐specific heterogeneity," Australian Economic Papers, Wiley Blackwell, vol. 58(2), pages 194-206, June.
    • Handle: RePEc:bla:ausecp:v:58:y:2019:i:2:p:194-206
    DOI: 10.1111/1467-8454.12149
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    Cited by:

    1. Bohlmann, J.A. & Inglesi-Lotz, R., 2021. "Examining the determinants of electricity demand by South African households per income level," Energy Policy, Elsevier, vol. 148(PA).
    2. Devkota, Laxmi P. & Bhattarai, Utsav & Khatri, Pawan & Marahatta, Suresh & Shrestha, Dibesh, 2022. "Resilience of hydropower plants to flow variation through the concept of flow elasticity of power: Theoretical development," Renewable Energy, Elsevier, vol. 184(C), pages 920-932.
    3. Lorraine Conway & David Prentice, 2020. "How Much do Households Respond to Electricity Prices? Evidence from Australia and Abroad," Economic Papers, The Economic Society of Australia, vol. 39(3), pages 290-311, September.
    4. Chai, Andreas & Ratnasiri, Shyama & Wagner, Liam, 2021. "The impact of rising energy prices on energy poverty in Queensland: A microsimulation exercise," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 57-72.
    5. Selvanathan, Saroja & Selvanathan, E.A. & Jayasinghe, Maneka, 2021. "A new approach to analyse conditional demand: An application to Australian energy consumption," Energy Economics, Elsevier, vol. 93(C).

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