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The demand function for residential heat through district heating system and its consumption benefits in Korea

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  • Lim, Seul-Ye
  • Kim, Hyo-Jin
  • Yoo, Seung-Hoon

Abstract

The demand for residential heat (RH) through a district heating system (DHS) has been and will be expanded in Korea due to its better performance in energy efficiency and the abatement of greenhouse gas emissions than decentralized boilers. The purposes of this paper are two-fold. The first is to obtain the demand function for DHS-based RH in Korea and investigate the price and income elasticities of the demand employing the quarterly data covering the period 1988–2013. The short-run price and income elasticities are estimated as −0.700 and 0.918, respectively. Moreover, the long-run elasticities are −1.253 and 1.642, respectively. The second purpose is to measure the consumption benefits of DHS-based-RH employing the economic theory that they are the sum of the actual payment and consumer surplus for the consumption. Considering that the average price and estimated consumer surplus of the DHS-based RH use in 2013 are computed to be KRW 87,870 (USD 84.1) and KRW 62,764 (USD 60.1) per Gcal, the consumption benefits of the DHS-based RH are calculated to be KRW 150,634 (USD 144.2) per Gcal. This information can be beneficially utilized to conduct an economic feasibility study for a new DHS project related to RH supply.

Suggested Citation

  • Lim, Seul-Ye & Kim, Hyo-Jin & Yoo, Seung-Hoon, 2016. "The demand function for residential heat through district heating system and its consumption benefits in Korea," Energy Policy, Elsevier, vol. 97(C), pages 155-160.
    • Handle: RePEc:eee:enepol:v:97:y:2016:i:c:p:155-160
    DOI: 10.1016/j.enpol.2016.07.019
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    References listed on IDEAS

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    Cited by:

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    2. Guo, Xiaodan & Xiao, Bowen, 2022. "How can pricing strategy for district heating help China realize cleaner residential heating?," Energy Economics, Elsevier, vol. 110(C).
    3. Hyo-Jin Kim & Su-Mi Han & Seung-Hoon Yoo, 2018. "Measuring the Economic Benefits of Industrial Natural Gas Use in South Korea," Sustainability, MDPI, vol. 10(7), pages 1-10, June.
    4. Seul-Ye Lim & Jeoung-Sik Min & Seung-Hoon Yoo, 2021. "Price and Income Elasticities of Residential Heat Demand from District Heating System: A Price Sensitivity Measurement Experiment in South Korea," Sustainability, MDPI, vol. 13(13), pages 1-10, June.
    5. Kim, Ju-Hee & Lim, Seul-Ye & Yoo, Seung-Hoon, 2023. "Does district heating affect residential property prices? Case study of an urban area in South Korea," Utilities Policy, Elsevier, vol. 83(C).
    6. Hyo-Jin Kim & Hee-Hoon Kim & Seung-Hoon Yoo, 2018. "The Marginal Value of Heat in the Korean Manufacturing Industry," Sustainability, MDPI, vol. 10(6), pages 1-6, June.
    7. So-Yeon Park & Seul-Ye Lim & Seung-Hoon Yoo, 2016. "The Economic Value of the National Meteorological Service in the Korean Household Sector: A Contingent Valuation Study," Sustainability, MDPI, vol. 8(9), pages 1-13, August.

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