Estimating the Short and Long Term Effects of Electricity Price on Household Electricity Demand in Iranian Provinces

Document Type : Research Paper

Authors

1 M.A of Economics, University of Ilam, Ilam, Iran.

2 Associate Professor of Economics, University of Ilam, Ilam, Iran.

10.22103/jdc.2020.14660.1079

Abstract

Objective: The energy sector has always been considered as one of the key and influential sectors in the country's economy and the analysis of the interaction effects of this sector or other productive sectors and the impact of decisions and policies related to those sectors and various economic factors such as households is very It is important. In the Iranian economy, energy carriers, especially electricity, are subject to subsidies and The government provides electricity to the people at a price far below cost.
Therefore, it always incurs heavy costs for providing hidden subsidies. according to the Law on Targeted Subsidies, the government is obliged to liberalize the prices of various energy carriers, including electricity, in stages, and this liberalization has always acted as a shock, and this shock will have several effects on electricity demand. Therefore, the purpose of this study is to estimate the short-term and long-term effects of electricity prices on household electricity demand in the provinces of Iran.
Methods: This study uses experimental data to study and estimate the response of household electricity demand to electricity prices in the provinces of Iran based on the ARDL panel method in the period 1991 to 2014. For this purpose, the household electricity demand function is a function of the average current price of electricity, the average current price of natural gas as a substitute, the number of hot days of the year and the average household income. In order to investigate the effect of electricity price shocks, the electricity price variable has been divided into two variables, electricity price shock and electricity price trend, using the Hodrick Prescott filter.
Results: The results of model fit show that price shock elasticity is in the short run (-0.06) and in the long run the price elasticity is (-0.38). The price elasticity is in the short run (-5.39) and in the long run (-52.40). In addition, the findings show that the consumption of the previous period always has a positive and significant effect on electricity consumption of the current period. as one unit of increase in electricity consumption in the previous period, causes an increase of 0.32 units of electricity consumption in the current period. Gas price as a substitute commodity also has a positive and significant effect on electricity consumption in the household sector in the same period, the variable coefficient of electricity price (trend) has a negative and significant effect on electricity consumption in the current period in the household sector.
Conclusion: This study shows that in Iran, electricity for home consumers is a short-term commodity and a long-term commodity in the long run. and the short-run and long-run income trend suggests that electricity is a normal commodity among home consumers. Cross-tensile examination of the gas indicates that the gas is a traction product and a substitute for electricity. Examination of the effect of temperature also shows that this variable will have a positive effect on power consumption. The error correction study also shows that in each period, 69% of the imbalance in household electricity demand is moderated and moves to the long run. Examination of the error correction factor also shows that in each period, 69% of the imbalance in household electricity demand is adjusted and moves towards a long-term value. The study of the effect of air temperature also shows that with increasing air temperature, the amount of electricity consumption in the residential sector increases. The results also show that the percentage of urban population has a positive effect on electricity consumption in the household sector but is not statistically significant.

Keywords

References

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History

  • Receive Date: 03 September 2019
  • Revise Date: 08 July 2020
  • Accept Date: 07 September 2020

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