Estimating short and long-term residential demand for electricity : new evidence from Sri Lanka
This 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 032, - 0.16 and 0.10 respectively. Liquefied petroleum (LP) gas is a substitute for electricity only in the short-run with an elasticity 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 ill the country.
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|Item Type:||Journal Article|
|Keywords:||Electricity Demand, Price and Income Elasticities, Cointegration Analysis|
|Subjects:||Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Environment and Resource Economics (140205)|
Australian and New Zealand Standard Research Classification > ECONOMICS (140000) > APPLIED ECONOMICS (140200) > Applied Economics not elsewhere classified (140299)
|Divisions:||Current > QUT Faculties and Divisions > QUT Business School|
Current > Schools > School of Economics & Finance
|Copyright Owner:||Copyright 2009 Elsevier|
|Deposited On:||02 Jun 2010 08:58|
|Last Modified:||29 Feb 2012 23:58|
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