Estimating short and long-term residential demand for electricity: New evidence from Sri Lanka
AbstractThis study investigates the short-run dynamics and long-run equilibrium relationship between residential electricity demand and factors influencing demand - per capita income, price of electricity, price of kerosene oil and price of liquefied petroleum gas - using annual data for Sri Lanka for the period, 1960-2007. The study uses unit root, cointegration and error-correction models. The long-run demand elasticities of income, own price and price of kerosene oil (substitute) were estimated to be 0.78, - 0.62, and 0.14 respectively. The short-run elasticities for the same variables were estimated to be 0.32, - 0.16 and 0.10 respectively. Liquefied petroleum (LP) gas is a substitute for electricity only in the short-run with an elasticity of 0.09. The main findings of the paper support the following (1) increasing the price of electricity is not the most effective tool to reduce electricity consumption (2) existing subsidies on electricity consumption can be removed without reducing government revenue (3) the long-run income elasticity of demand shows that any future increase in household incomes is likely to significantly increase the demand for electricity and (4) any power generation plans which consider only current per capita consumption and population growth should be revised taking into account the potential future income increases in order to avoid power shortages in the country.
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Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 32 (2010)
Issue (Month): Supplement 1 (September)
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Web page: http://www.elsevier.com/locate/eneco
Electricity demand Price and income elasticities Cointegration analysis;
Other versions of this item:
- Wasantha Athukorala & Clevo Wilson, 2010. "Estimating short and long-term residential demand for electricity: New evidence from Sri Lanka," School of Economics and Finance Discussion Papers and Working Papers Series 254, School of Economics and Finance, Queensland University of Technology.
- Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
- Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
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- Bernstein, Ronald & Madlener, Reinhard, 2011. "Responsiveness of Residential Electricity Demand in OECD Countries: A Panel Cointegation and Causality Analysis," FCN Working Papers 8/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
- Ngui, Dianah & Mutua, John & Osiolo, Hellen & Aligula, Eric, 2011. "Household energy demand in Kenya: An application of the linear approximate almost ideal demand system (LA-AIDS)," Energy Policy, Elsevier, vol. 39(11), pages 7084-7094.
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