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

Yanan Liu, Yixuan Gao, Yu Hao and Hua Liao ()
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Yanan Liu: School of Management and Economics, Beijing Institute of Technology, 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

Energies, 2016, vol. 9, issue 10, 1-11

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.

Keywords: residential electricity consumption; income; piecewise linear model; China; robust tests (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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