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Seasonality, Cointegration, and Forecasting UK Residential Energy Demand

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  • Michael P. Clements
  • Reinhard Madlener

Abstract

Much of the short‐run movement in energy demand in the UK is seasonal, and the contribution of long‐run factors to short‐run forecasts is slight. Nevertheless, using a variety of techniques, including a recently developed estimation procedure that is applicable irrespective of the orders of integration of the data, we obtain a long‐run income elasticity of demand of about one third, and we are unable to reject a zero price elasticity. An econometric model is shown to provide superior short‐run forecasts to well‐known seasonal time series models ex post, but is inferior to Box‐Jenkins SARMA models when the determinants themselves have to be forecast. However, the relatively short data sample and small number of forecasts suggest caution in generalising these results.

Suggested Citation

  • Michael P. Clements & Reinhard Madlener, 1999. "Seasonality, Cointegration, and Forecasting UK Residential Energy Demand," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(2), pages 185-206, May.
  • Handle: RePEc:bla:scotjp:v:46:y:1999:i:2:p:185-206
    DOI: 10.1111/1467-9485.00128
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    1. Zachariadis, Theodoros & Hadjinicolaou, Panos, 2014. "The effect of climate change on electricity needs – A case study from Mediterranean Europe," Energy, Elsevier, vol. 76(C), pages 899-910.
    2. Hunt, Lester C. & Judge, Guy & Ninomiya, Yasushi, 2003. "Underlying trends and seasonality in UK energy demand: a sectoral analysis," Energy Economics, Elsevier, vol. 25(1), pages 93-118, January.
    3. Pinjari, Abdul Rawoof & Bhat, Chandra, 2021. "Computationally efficient forecasting procedures for Kuhn-Tucker consumer demand model systems: Application to residential energy consumption analysis," Journal of choice modelling, Elsevier, vol. 39(C).
    4. Zachariadis, Theodoros & Pashourtidou, Nicoletta, 2007. "An empirical analysis of electricity consumption in Cyprus," Energy Economics, Elsevier, vol. 29(2), pages 183-198, March.
    5. Zachariadis, Theodoros, 2010. "Forecast of electricity consumption in Cyprus up to the year 2030: The potential impact of climate change," Energy Policy, Elsevier, vol. 38(2), pages 744-750, February.
    6. Hondroyiannis, George, 2004. "Estimating residential demand for electricity in Greece," Energy Economics, Elsevier, vol. 26(3), pages 319-334, May.
    7. Zachariadis, Theodoros & Poullikkas, Andreas, 2012. "The costs of power outages: A case study from Cyprus," Energy Policy, Elsevier, vol. 51(C), pages 630-641.
    8. Herrerias, M.J., 2013. "Seasonal anomalies in electricity intensity across Chinese regions," Applied Energy, Elsevier, vol. 112(C), pages 1548-1557.
    9. Bhattacharyya, Subhes C. & Timilsina, Govinda R., 2010. "Modelling energy demand of developing countries: Are the specific features adequately captured?," Energy Policy, Elsevier, vol. 38(4), pages 1979-1990, April.
    10. Mudassir Zaman & Farzana Shaheen & Azad Haider & Sadia Qamar, 2015. "Examining Relationship between Electricity Consumption and its Major Determinants in Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 5(4), pages 998-1009.
    11. M.Adetunji BABATUNDE & M.Isa SHAUIBU, 2011. "The Demand for Residential Electricity in Nigeria," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 21, pages 1-13.
    12. Noel Alter & Shabib Haider Syed, 2011. "An Empirical Analysis of Electricity Demand in Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 1(4), pages 116-139.
    13. Narayan, Paresh Kumar & Smyth, Russell & Prasad, Arti, 2007. "Electricity consumption in G7 countries: A panel cointegration analysis of residential demand elasticities," Energy Policy, Elsevier, vol. 35(9), pages 4485-4494, September.
    14. Lester C. Hunt & Guy Judge & Yashushi Ninomiya, 2000. "Modelling Technical Progress: An Application of the Stochastic Trend Model to UK Energy Demand," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 99, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
    15. Maria Jesus Herrerias and Eric Girardin, 2013. "Seasonal Patterns of Energy in China," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    16. Muhammad Arshad Khan & Abdul Qayyum, 2009. "The demand for electricity in Pakistan," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 33(1), pages 70-96, March.
    17. Inchauspe, Julian & Li, Jun & Park, Jason, 2020. "Seasonal patterns of global oil consumption: Implications for long term energy policy," Journal of Policy Modeling, Elsevier, vol. 42(3), pages 536-556.
    18. Jamil, Faisal & Ahmad, Eatzaz, 2011. "Income and price elasticities of electricity demand: Aggregate and sector-wise analyses," Energy Policy, Elsevier, vol. 39(9), pages 5519-5527, September.

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