IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i13p7242-d584228.html
   My bibliography  Save this article

Price and Income Elasticities of Residential Heat Demand from District Heating System: A Price Sensitivity Measurement Experiment in South Korea

Author

Listed:
  • Seul-Ye Lim

    (Research Strategy Department, Frontier Research & Training Institute, Korea District Heating Corporation, 92 Gigok-Ro, Giheung-Gu, Yongin 17099, Korea)

  • Jeoung-Sik Min

    (Department of Energy and Environment Convergence, Graduate School of Convergence Science, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea)

  • Seung-Hoon Yoo

    (Department of Energy Policy, Graduate School of Convergence Science, Seoul National University of Science & Technology, 232 Gongreung-Ro, Nowon-Gu, Seoul 01811, Korea)

Abstract

Since the price for residential heat (RH) from district heating system in South Korea is regulated by the government rather than being freely determined in the market, it is difficult to estimate the demand function for RH properly using the distorted market data. Thus, undistorted data on price and demand are required in obtaining the demand function. This article tries to estimate the demand function for RH by applying the price sensitivity measurement (PSM) technique, with some variation, and then use this to obtain information about the price and income elasticities. To this end, in the PSM survey 1000 households were first asked about their consumption of RH and their expenditure on that consumption and then asked about how much they would lower their demand for RH in response to four hypothetical increases in the price for RH (10%, 20%, 50%, and 100%). Thus, five sets of price and consumption of RH were available for each household. The demand function for RH was estimated using a total of 5000 observations. The price and income elasticities were estimated with statistical significance to be about −0.478 and 0.033, respectively. These values can be utilized in decision-making and/or policy-making related to RH management.

Suggested Citation

  • Seul-Ye Lim & Jeoung-Sik Min & Seung-Hoon Yoo, 2021. "Price and Income Elasticities of Residential Heat Demand from District Heating System: A Price Sensitivity Measurement Experiment in South Korea," Sustainability, MDPI, vol. 13(13), pages 1-10, June.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:13:p:7242-:d:584228
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/13/7242/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/13/7242/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lim, Seul-Ye & Kim, Hyo-Jin & Yoo, Seung-Hoon, 2016. "The demand function for residential heat through district heating system and its consumption benefits in Korea," Energy Policy, Elsevier, vol. 97(C), pages 155-160.
    2. Kurek, Teresa & Bielecki, Artur & Świrski, Konrad & Wojdan, Konrad & Guzek, Michał & Białek, Jakub & Brzozowski, Rafał & Serafin, Rafał, 2021. "Heat demand forecasting algorithm for a Warsaw district heating network," Energy, Elsevier, vol. 217(C).
    3. Agrell, Per J. & Bogetoft, Peter, 2005. "Economic and environmental efficiency of district heating plants," Energy Policy, Elsevier, vol. 33(10), pages 1351-1362, July.
    4. Heitkoetter, Wilko & Medjroubi, Wided & Vogt, Thomas & Agert, Carsten, 2020. "Regionalised heat demand and power-to-heat capacities in Germany – An open dataset for assessing renewable energy integration," Applied Energy, Elsevier, vol. 259(C).
    5. Meha, Drilon & Novosel, Tomislav & Duić, Neven, 2020. "Bottom-up and top-down heat demand mapping methods for small municipalities, case Gllogoc," Energy, Elsevier, vol. 199(C).
    6. Canet, Alexandre & Qadrdan, Meysam & Jenkins, Nick, 2021. "Heat demand mapping and assessment of heat supply options for local areas – The case study of Neath Port Talbot," Energy, Elsevier, vol. 217(C).
    7. Alexander, Donald L. & Kern, William & Neill, Jon, 2000. "Valuing the Consumption Benefits from Professional Sports Franchises," Journal of Urban Economics, Elsevier, vol. 48(2), pages 321-337, September.
    8. Weiwei Liu, 2016. "Estimating the elasticities of gasoline demand: an instrumental variable approach," Applied Economics Letters, Taylor & Francis Journals, vol. 23(16), pages 1153-1156, November.
    9. Massimiliano Mazzanti & Anna Montini, 2006. "The determinants of residential water demand: empirical evidence for a panel of Italian municipalities," Applied Economics Letters, Taylor & Francis Journals, vol. 13(2), pages 107-111.
    10. Hyo-Jin Kim & Jae-Sung Paek & Seung-Hoon Yoo, 2019. "Price Elasticity of Heat Demand in South Korean Manufacturing Sector: An Empirical Investigation," Sustainability, MDPI, vol. 11(21), pages 1-10, November.
    11. Liao, Huei-Chu & Chang, Tsai-Feng, 2002. "Space-heating and water-heating energy demands of the aged in the US," Energy Economics, Elsevier, vol. 24(3), pages 267-284, May.
    12. Bianchi, Michele & Branchini, Lisa & De Pascale, Andrea & Peretto, Antonio, 2014. "Application of environmental performance assessment of CHP systems with local and global approaches," Applied Energy, Elsevier, vol. 130(C), pages 774-782.
    13. Arnaudo, Monica & Topel, Monika & Puerto, Pablo & Widl, Edmund & Laumert, Björn, 2019. "Heat demand peak shaving in urban integrated energy systems by demand side management - A techno-economic and environmental approach," Energy, Elsevier, vol. 186(C).
    14. Möller, Bernd & Wiechers, Eva & Persson, Urban & Grundahl, Lars & Connolly, David, 2018. "Heat Roadmap Europe: Identifying local heat demand and supply areas with a European thermal atlas," Energy, Elsevier, vol. 158(C), pages 281-292.
    15. Clegg, Stephen & Mancarella, Pierluigi, 2019. "Integrated electricity-heat-gas modelling and assessment, with applications to the Great Britain system. Part I: High-resolution spatial and temporal heat demand modelling," Energy, Elsevier, vol. 184(C), pages 180-190.
    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. Ju-Hee Kim & Byoung-Soh Hwang & Seung-Hoon Yoo, 2022. "Estimating the Demand Function for Residential City Gas in South Korea: Findings from a Price Sensitivity Measurement Experiment," Sustainability, MDPI, vol. 14(12), pages 1-13, June.
    2. Evita Hanie Pangaribowo & Deden Dinar Iskandar, 2023. "Exploring socio-economic determinants of energy choices for cooking: the case of eastern Indonesian households," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(7), pages 7135-7148, July.
    3. Anders Rhiger Hansen & Daniel Leiria & Hicham Johra & Anna Marszal-Pomianowska, 2022. "Who Produces the Peaks? Household Variation in Peak Energy Demand for Space Heating and Domestic Hot Water," Energies, MDPI, vol. 15(24), pages 1-23, December.
    4. Trotta, Gianluca & Hansen, Anders Rhiger & Sommer, Stephan, 2022. "The price elasticity of residential district heating demand: New evidence from a dynamic panel approach," Energy Economics, Elsevier, vol. 112(C).

    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. Kim, Ju-Hee & Lim, Seul-Ye & Yoo, Seung-Hoon, 2023. "Does district heating affect residential property prices? Case study of an urban area in South Korea," Utilities Policy, Elsevier, vol. 83(C).
    2. Hyo-Jin Kim & Jae-Sung Paek & Seung-Hoon Yoo, 2019. "Price Elasticity of Heat Demand in South Korean Manufacturing Sector: An Empirical Investigation," Sustainability, MDPI, vol. 11(21), pages 1-10, November.
    3. Hyo-Jin Kim & Jeong-Joon Yu & Seung-Hoon Yoo, 2019. "Does Combined Heat and Power Play the Role of a Bridge in Energy Transition? Evidence from a Cross-Country Analysis," Sustainability, MDPI, vol. 11(4), pages 1-8, February.
    4. Min, Jeoung-Sik & Lim, Seul-Ye & Yoo, Seung-Hoon, 2019. "Economic output-maximizing share of combined heat and power generation: The case of South Korea," Energy Policy, Elsevier, vol. 132(C), pages 1087-1091.
    5. Kim, Ju-Hee & Kim, Hee-Hoon & Yoo, Seung-Hoon, 2022. "Social acceptance toward constructing a combined heat and power plant near people's dwellings in South Korea," Energy, Elsevier, vol. 244(PB).
    6. Kılkış, Şiir, 2021. "Transition towards urban system integration and benchmarking of an urban area to accelerate mitigation towards net-zero targets," Energy, Elsevier, vol. 236(C).
    7. Meha, Drilon & Dragusha, Bedri & Thakur, Jagruti & Novosel, Tomislav & Duić, Neven, 2021. "A novel spatial based approach for estimation of space heating demand saving potential and CO2 emissions reduction in urban areas," Energy, Elsevier, vol. 225(C).
    8. Li, Wenjia & Hao, Yong & Wang, Hongsheng & Liu, Hao & Sui, Jun, 2017. "Efficient and low-carbon heat and power cogeneration with photovoltaics and thermochemical storage," Applied Energy, Elsevier, vol. 206(C), pages 1523-1531.
    9. Sayegh, M.A. & Danielewicz, J. & Nannou, T. & Miniewicz, M. & Jadwiszczak, P. & Piekarska, K. & Jouhara, H., 2017. "Trends of European research and development in district heating technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P2), pages 1183-1192.
    10. 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.
    11. Persson, Urban & Wiechers, Eva & Möller, Bernd & Werner, Sven, 2019. "Heat Roadmap Europe: Heat distribution costs," Energy, Elsevier, vol. 176(C), pages 604-622.
    12. Michelsen, Carl Christian & Madlener, Reinhard, 2016. "Switching from fossil fuel to renewables in residential heating systems: An empirical study of homeowners' decisions in Germany," Energy Policy, Elsevier, vol. 89(C), pages 95-105.
    13. L. Hay & A. H. B. Duffy & R. I. Whitfield, 2017. "The S‐Cycle Performance Matrix: Supporting Comprehensive Sustainability Performance Evaluation of Technical Systems," Systems Engineering, John Wiley & Sons, vol. 20(1), pages 45-70, January.
    14. Sahoo, Somadutta & Zuidema, Christian & van Stralen, Joost N.P. & Sijm, Jos & Faaij, André, 2022. "Detailed spatial analysis of renewables’ potential and heat: A study of Groningen Province in the northern Netherlands," Applied Energy, Elsevier, vol. 318(C).
    15. Besagni, Giorgio & Premoli Vilà, Lidia & Borgarello, Marco & Trabucchi, Andrea & Merlo, Marco & Rodeschini, Jacopo & Finazzi, Francesco, 2021. "Electrification pathways of the Italian residential sector under socio-demographic constrains: Looking towards 2040," Energy, Elsevier, vol. 217(C).
    16. Langevin, J. & Reyna, J.L. & Ebrahimigharehbaghi, S. & Sandberg, N. & Fennell, P. & Nägeli, C. & Laverge, J. & Delghust, M. & Mata, É. & Van Hove, M. & Webster, J. & Federico, F. & Jakob, M. & Camaras, 2020. "Developing a common approach for classifying building stock energy models," Renewable and Sustainable Energy Reviews, Elsevier, vol. 133(C).
    17. Hyo-Jin Kim & Su-Mi Han & Seung-Hoon Yoo, 2018. "Measuring the Economic Benefits of Industrial Natural Gas Use in South Korea," Sustainability, MDPI, vol. 10(7), pages 1-10, June.
    18. Lynes, Melissa & Featherstone, Allen, 2015. "Economic Efficiency of Utility Plants Under Renewable Energy Policy," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205674, Agricultural and Applied Economics Association.
    19. Maria Alessandra Ancona & Michele Bianchi & Lisa Branchini & Andrea De Pascale & Francesco Melino & Antonio Peretto & Noemi Torricelli, 2021. "Systematic Comparison of ORC and s-CO 2 Combined Heat and Power Plants for Energy Harvesting in Industrial Gas Turbines," Energies, MDPI, vol. 14(12), pages 1-22, June.
    20. Lim, Kyoung-Min & Lim, Seul-Ye & Yoo, Seung-Hoon, 2014. "Estimating the economic value of residential electricity use in the Republic of Korea using contingent valuation," Energy, Elsevier, vol. 64(C), pages 601-606.

    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:jsusta:v:13:y:2021:i:13:p:7242-:d:584228. 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.