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Electricity Demand for Sri Lanka: A Time Series Analysis

  • Himanshu A. Amarawickrama

    ()

    (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey & Infrastructure Advisory, Ernst and Young LLP, London)

  • Lester C Hunt

    ()

    (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)

This study estimates electricity demand functions for Sri Lanka using six econometric techniques. It shows that the preferred specifications differ somewhat and there is a wide range in the long-run price and income elasticities with the estimated long-run income elasticity ranging from 1.0 to 2.0 and the long run price elasticity from 0 to –0.06. There is also a wide range of estimates of the speed with which consumers would adjust to any disequilibrium, although the estimated impact income elasticities tended to be more in agreement ranging from 1.8 to 2.0. Furthermore, the estimated effect of the underlying energy demand trend varies between the different techniques; ranging from being positive to zero to predominantly negative. Despite these differences the forecasts generated from the six models up until 2025 do not differ significantly. Thus on one hand it is encouraging that the Sri Lanka electricity authorities can have some faith in econometrically estimated models used for forecasting. However, by the end of the forecast period in 2025 there is a variation of around 452MW in the base forecast peak demand; which, in relative terms for a small electricity generation system like Sri Lanka’s, represents a considerable difference.

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File URL: http://www.seec.surrey.ac.uk/Research/SEEDS/SEEDS118.pdf
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Paper provided by Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey in its series Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) with number 118.

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Length: 46 pages
Date of creation: Oct 2007
Date of revision:
Publication status: Published in Energy 33(5) 2008, pp. 724-739. (Revised Version)
Handle: RePEc:sur:seedps:118
Contact details of provider: Postal: Guildford, Surrey GU2 5XH, UK
Phone: +44(0)1483 686956
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  1. Hunt, Lester & Manning, Neil, 1989. "Energy Price- and Income-Elasticities of Demand: Some Estimates for the UK Using the Cointegration Procedure," Scottish Journal of Political Economy, Scottish Economic Society, vol. 36(2), pages 183-93, May.
  2. James G. MacKinnon, 1995. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Working Papers 918, Queen's University, Department of Economics.
  3. 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.
  4. Adeyemi, Olutomi I. & Hunt, Lester C., 2007. "Modelling OECD industrial energy demand: Asymmetric price responses and energy-saving technical change," Energy Economics, Elsevier, vol. 29(4), pages 693-709, July.
  5. Harvey, Andrew, 1997. "Trends, Cycles and Autoregressions," Economic Journal, Royal Economic Society, vol. 107(440), pages 192-201, January.
  6. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  7. Schwert, G William, 1989. "Tests for Unit Roots: A Monte Carlo Investigation," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(2), pages 147-59, April.
  8. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
  9. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
  10. Lester C Hunt & Yasushi Ninomiya, 2003. "Modelling Underlying Energy Demand Trends and Stochastic Seasonality: An Econometric Analysis of Transport Oil Demand in the UK and Japan," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 107, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  11. Himanshu A. Amarawickrama & Lester C Hunt, 2004. "Sri Lankan Electricity Supply Industry: A Critique of Proposed Reforms," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 109, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  12. Harvey, Andrew C & Koopman, Siem Jan, 1992. "Diagnostic Checking of Unobserved-Components Time Series Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 377-89, October.
  13. Inder, Brett, 1993. "Estimating long-run relationships in economics : A comparison of different approaches," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 53-68.
  14. Phillips, Peter C B & Hansen, Bruce E, 1990. "Statistical Inference in Instrumental Variables Regression with I(1) Processes," Review of Economic Studies, Wiley Blackwell, vol. 57(1), pages 99-125, January.
  15. Morimoto, Risako & Hope, Chris, 2004. "The impact of electricity supply on economic growth in Sri Lanka," Energy Economics, Elsevier, vol. 26(1), pages 77-85, January.
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