Estimation of residential electricity demand in Hong Kong under electricity charge subsidies

Tunç Durmaz, Aude Pommeret and Huseyin Tastan
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Tunç Durmaz: YTU - Yildiz Technical University
Aude Pommeret: IREGE - Institut de Recherche en Gestion et en Economie - USMB [Université de Savoie] [Université de Chambéry] - Université Savoie Mont Blanc

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Abstract: Over the past decade, the Hong Kong (HK) government provided electricity charges subsidies for residential accounts to alleviate the burden of inflation and, later, the burden of economic downturn. In this study, we estimate an econometric model of residential electricity demand and test the existence of a stable long-run relationship for the period 1980–2016, while accounting for the relief measures set out by the HK government since 2008. Empirical results suggest that there exists a long-run relationship among residential electricity consumption, electricity price, income per capita, and weather variables (temperature or cooling degree days). In the absence of electricity charge subsidies, the demand is found to be both price and income inelastic. On the other hand, HK's residential electricity consumers are unresponsive to price and income changes when electricity subsidies are in place. Following its new carbon reduction plan, HK is gradually phasing out coal for electricity generation to replace it mainly with natural gas. Our results suggest that new residential electricity charge subsidies can lessen the effectiveness of6 climate policies aimed at reducing electricity consumption through increases in the electricity price.

Keywords: Residential electricity; Price and income elasticities; Cointegration analysis; Electricity charge subsidies (search for similar items in EconPapers)
Date: 2020-07
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Citations: View citations in EconPapers (3)

Published in Energy Economics, 2020, 88, pp.104742. ⟨10.1016/j.eneco.2020.104742⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03969145

DOI: 10.1016/j.eneco.2020.104742

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