IDEAS home Printed from https://ideas.repec.org/a/gam/jeners/v9y2016i10p831-d80647.html
   My bibliography  Save this article

The Relationship between Residential Electricity Consumption and Income: A Piecewise Linear Model with Panel Data

Author

Listed:
  • Yanan Liu

    (School of Management and Economics, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Center for Energy and Environmental Policy Research, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Collaborative Innovation Center of Electric Vehicles in Beijing, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China)

  • Yixuan Gao

    (School of Management and Economics, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Center for Energy and Environmental Policy Research, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Collaborative Innovation Center of Electric Vehicles in Beijing, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Department of Natural Resources and the Environment, University of New Hampshire, 56 College Road, Durham, NH 03824, USA)

  • Yu Hao

    (School of Management and Economics, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Center for Energy and Environmental Policy Research, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Collaborative Innovation Center of Electric Vehicles in Beijing, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China)

  • Hua Liao

    (School of Management and Economics, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Center for Energy and Environmental Policy Research, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
    Collaborative Innovation Center of Electric Vehicles in Beijing, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China)

Abstract

There are many uncertainties and risks in residential electricity consumption associated with economic development. Knowledge of the relationship between residential electricity consumption and its key determinant—income—is important to the sustainable development of the electric power industry. Using panel data from 30 provinces for the 1995–2012 period, this study investigates how residential electricity consumption changes as incomes increase in China. Previous studies typically used linear or quadratic double-logarithmic models imposing ex ante restrictions on the indistinct relationship between residential electricity consumption and income. Contrary to those models, we employed a reduced piecewise linear model that is self-adaptive and highly flexible and circumvents the problem of “prior restrictions”. Robust tests of different segment specifications and regression methods are performed to ensure the validity of the research. The results provide strong evidence that the income elasticity was approximately one, and it remained stable throughout the estimation period. The income threshold at which residential electricity consumption automatically remains stable or slows has not been reached. To ensure the sustainable development of the electric power industry, introducing higher energy efficiency standards for electrical appliances and improving income levels are vital. Government should also emphasize electricity conservation in the industrial sector rather than in residential sector.

Suggested Citation

  • Yanan Liu & Yixuan Gao & Yu Hao & Hua Liao, 2016. "The Relationship between Residential Electricity Consumption and Income: A Piecewise Linear Model with Panel Data," Energies, MDPI, vol. 9(10), pages 1-11, October.
    • Handle: RePEc:gam:jeners:v:9:y:2016:i:10:p:831-:d:80647
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1996-1073/9/10/831/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1996-1073/9/10/831/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Xin Tang & Hua Liao, 2014. "Energy poverty and solid fuels use in rural China: Analysis based on national population census," CEEP-BIT Working Papers 57, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    2. Maximilian Auffhammer & Catherine D. Wolfram, 2014. "Powering Up China: Income Distributions and Residential Electricity Consumption," American Economic Review, American Economic Association, vol. 104(5), pages 575-580, May.
    3. Muhammad Babar Rasheed & Nadeem Javaid & Ashfaq Ahmad & Mohsin Jamil & Zahoor Ali Khan & Umar Qasim & Nabil Alrajeh, 2016. "Energy Optimization in Smart Homes Using Customer Preference and Dynamic Pricing," Energies, MDPI, vol. 9(8), pages 1-25, July.
    4. Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011. "Residential consumption of gas and electricity in the U.S.: The role of prices and income," Energy Economics, Elsevier, vol. 33(5), pages 870-881, September.
    5. Amy K. Richmond & Robert K. Kaufmann, 2006. "Energy Prices and Turning Points: The Relationship between Income and Energy Use/Carbon Emissions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 157-180.
    6. Maximilian Auffhammer & Ralf Steinhauser, 2012. "Forecasting The Path of U.S. CO_2 Emissions Using State-Level Information," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 172-185, February.
    7. Ziramba, Emmanuel, 2008. "The demand for residential electricity in South Africa," Energy Policy, Elsevier, vol. 36(9), pages 3460-3466, September.
    8. Blázquez, Leticia & Boogen, Nina & Filippini, Massimo, 2013. "Residential electricity demand in Spain: New empirical evidence using aggregate data," Energy Economics, Elsevier, vol. 36(C), pages 648-657.
    9. Huiru Zhao & Haoran Zhao & Sen Guo & Fuqiang Li & Yuou Hu, 2016. "The Impact of Financial Crisis on Electricity Demand: A Case Study of North China," Energies, MDPI, vol. 9(4), pages 1-13, March.
    10. Dergiades, Theologos & Tsoulfidis, Lefteris, 2008. "Estimating residential demand for electricity in the United States, 1965-2006," Energy Economics, Elsevier, vol. 30(5), pages 2722-2730, September.
    11. Alberini, Anna & Gans, Will & Velez-Lopez, Daniel, 2011. "Residential Consumption of Gas and Electricity in the U.S.: The Role of Prices and Income," Sustainable Development Papers 99637, Fondazione Eni Enrico Mattei (FEEM).
    12. Tooraj Jamasb & Helena Meier, 2010. "Household Energy Expenditure and Income Groups: Evidence from Great Britain," Working Papers EPRG 1003, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    13. Richard Schmalensee & Thomas M. Stoker & Ruth A. Judson, 1998. "World Carbon Dioxide Emissions: 1950-2050," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 15-27, February.
    14. Silk, Julian I. & Joutz, Frederick L., 1997. "Short and long-run elasticities in US residential electricity demand: a co-integration approach," Energy Economics, Elsevier, vol. 19(4), pages 493-513, October.
    15. Richmond, Amy K. & Kaufmann, Robert K., 2006. "Is there a turning point in the relationship between income and energy use and/or carbon emissions?," Ecological Economics, Elsevier, vol. 56(2), pages 176-189, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Chuan-Zhong & Wei, Chu & Yu, Yang, 2020. "Income threshold, household appliance ownership and residential energy consumption in urban China," China Economic Review, Elsevier, vol. 60(C).
    2. Dalla Longa, Francesco & van der Zwaan, Bob, 2021. "Heart of light: an assessment of enhanced electricity access in Africa," Renewable and Sustainable Energy Reviews, Elsevier, vol. 136(C).
    3. Djula Borozan, 2018. "Efficiency of Energy Taxes and the Validity of the Residential Electricity Environmental Kuznets Curve in the European Union," Sustainability, MDPI, vol. 10(7), pages 1-16, July.
    4. Poblete-Cazenave, Miguel & Pachauri, Shonali, 2020. "A simulation-based estimation model of household electricity demand and appliance ownership," MPRA Paper 103403, University Library of Munich, Germany.
    5. Onisanwa Idowu Daniel & Adaji Mercy Ojochegbe, 2020. "Electricity consumption and its determinants in Nigeria," Journal of Economics and Management, Sciendo, vol. 41(3), pages 87-104, September.
    6. Rehermann, F. & Pablo-Romero, M., 2018. "Economic growth and transport energy consumption in the Latin American and Caribbean countries," Energy Policy, Elsevier, vol. 122(C), pages 518-527.
    7. Poblete-Cazenave, Miguel & Pachauri, Shonali, 2021. "A model of energy poverty and access: Estimating household electricity demand and appliance ownership," Energy Economics, Elsevier, vol. 98(C).
    8. Fei Wang & Yili Yu & Xinkang Wang & Hui Ren & Miadreza Shafie-Khah & João P. S. Catalão, 2018. "Residential Electricity Consumption Level Impact Factor Analysis Based on Wrapper Feature Selection and Multinomial Logistic Regression," Energies, MDPI, vol. 11(5), pages 1-26, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Pellini, Elisabetta, 2021. "Estimating income and price elasticities of residential electricity demand with Autometrics," Energy Economics, Elsevier, vol. 101(C).
    2. John Curtis & Brian Stanley, 2016. "Analysing Residential Energy Demand: An Error Correction Demand System Approach for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(2), pages 185-211.
    3. Loi, Tian Sheng Allan & Loo, Soh Leng, 2016. "The impact of Singapore’s residential electricity conservation efforts and the way forward. Insights from the bounds testing approach," Energy Policy, Elsevier, vol. 98(C), pages 735-743.
    4. Cho, Seong-Hoon & Kim, Taeyoung & Kim, Hyun Jae & Park, Kihyun & Roberts, Roland K., 2015. "Regionally-varying and regionally-uniform electricity pricing policies compared across four usage categories," Energy Economics, Elsevier, vol. 49(C), pages 182-191.
    5. Fullerton Jr., Thomas M. & Macias, David R. & Walke, Adam G., 2016. "Residential Electricity Demand in El Paso," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 46(2), December.
    6. Jia, Jun-Jun & Guo, Jin & Wei, Chu, 2021. "Elasticities of residential electricity demand in China under increasing-block pricing constraint: New estimation using household survey data," Energy Policy, Elsevier, vol. 156(C).
    7. Hung, Ming-Feng & Huang, Tai-Hsin, 2015. "Dynamic demand for residential electricity in Taiwan under seasonality and increasing-block pricing," Energy Economics, Elsevier, vol. 48(C), pages 168-177.
    8. Mark Miller & Anna Alberini, 2015. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," CER-ETH Economics working paper series 15/223, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    9. Desiderio Romero-Jordán & Pablo del Río & Cristina Peñasco, 2014. "Household electricity demand in Spanish regions. Public policy implications," Working Papers 2014/24, Institut d'Economia de Barcelona (IEB).
    10. Miller, Mark & Alberini, Anna, 2016. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," Energy Policy, Elsevier, vol. 97(C), pages 235-249.
    11. Desiderio Romero-Jordán & Pablo del Río & Cristina Peñasco, 2014. "Household electricity demand in Spanish regions. Public policy implications," Working Papers 2014/24, Institut d'Economia de Barcelona (IEB).
    12. Mohammed Bouznit & María P. Pablo-Romero & Antonio Sánchez-Braza, 2018. "Residential Electricity Consumption and Economic Growth in Algeria," Energies, MDPI, vol. 11(7), pages 1-18, June.
    13. Romero-Jordán, Desiderio & del Río, Pablo & Peñasco, Cristina, 2016. "An analysis of the welfare and distributive implications of factors influencing household electricity consumption," Energy Policy, Elsevier, vol. 88(C), pages 361-370.
    14. Chen, Han & Huang, Ye & Shen, Huizhong & Chen, Yilin & Ru, Muye & Chen, Yuanchen & Lin, Nan & Su, Shu & Zhuo, Shaojie & Zhong, Qirui & Wang, Xilong & Liu, Junfeng & Li, Bengang & Tao, Shu, 2016. "Modeling temporal variations in global residential energy consumption and pollutant emissions," Applied Energy, Elsevier, vol. 184(C), pages 820-829.
    15. Alberini, Anna & Bezhanishvili, Levan & Ščasný, Milan, 2022. "“Wild” tariff schemes: Evidence from the Republic of Georgia," Energy Economics, Elsevier, vol. 110(C).
    16. Gautam, Tej K. & Paudel, Krishna P., 2018. "The demand for natural gas in the Northeastern United States," Energy, Elsevier, vol. 158(C), pages 890-898.
    17. Javier Bueno & Desiderio Romero-Jordán & Pablo del Río, 2020. "Analysing the Drivers of Electricity Demand in Spain after the Economic Crisis," Energies, MDPI, vol. 13(20), pages 1-18, October.
    18. Nina Boogen & Souvik Datta & Massimo Filippini, 2014. "Going beyond tradition: Estimating residential electricity demand using an appliance index and energy services," CER-ETH Economics working paper series 14/200, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    19. Xiaojia Bao, 2016. "Water, Electricity and Weather Variability in Rural Northern China," Working Papers 2014-07-02, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
    20. Koch, Steven F. & Nkuna, Blessings & Ye, Yuxiang, 2024. "Income elasticity of residential electricity consumption in rural South Africa," Energy Economics, Elsevier, vol. 131(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jeners:v:9:y:2016:i:10:p:831-:d:80647. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.