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Income and price elasticities of electricity demand in Australia: Evidence of state‐specific heterogeneity
Author(s) -
Doojav GanOchir,
Kalirajan Kaliappa
Publication year - 2019
Publication title -
australian economic papers
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.351
H-Index - 15
eISSN - 1467-8454
pISSN - 0004-900X
DOI - 10.1111/1467-8454.12149
Subject(s) - economics , electricity , distributed lag , econometrics , consumption (sociology) , electricity demand , price elasticity of demand , lag , electricity price , microeconomics , electricity generation , computer network , social science , power (physics) , physics , quantum mechanics , sociology , computer science , electrical engineering , engineering
This paper estimates country‐wide and state‐level income and price elasticities of electricity demand in Australia for the period 1999Q1–2013Q2 using the National Electricity Market data and the autoregressive‐distributed lag model. The results suggest that the long‐run income and price elasticities are inelastic and are statistically significant with theoretically consistent signs. The country‐wide income and price elasticities are estimated to be 0.41 and −0.38, respectively. It is also found that there exists state‐specific heterogeneity in both speed and magnitude of the electricity consumption adjustment in response to changes in income and electricity price. These results have important policy implications, including the need to use state‐specific elasticities in the scenario analysis of the energy pricing policy.