Economy of Scale in Electricity Consumption of Households in Vietnam

Tính kinh tế theo quy mô trong tiêu dùng điện của các hộ gia đình tại Việt Nam

Hoai Son Nguyen (), Minh Ha-Duong and Xuân Tháng Nguyen
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Hoai Son Nguyen: NEU - National Economics University [Hanoï, Vietnam]
Xuân Tháng Nguyen: NEU - National Economics University [Hanoï, Vietnam]

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Abstract: The study retests the economy of scale in electricity consumption under the tiered electricity pricing conditions with panel data constructed from the Vietnam Household Living Standards Survey (VHLSS) for the years 2014, 2016, and 2018. Using instrumental variables developed by McFadden, Puig, and Kirschner (1977) to represent tiered prices, the study has separated the impact of tiered pricing to estimate the economy of scale in electricity consumption of households in Vietnam from 2014 to 2018. The results show that even under the influence of tiered pricing, households still exhibit economies of scale in electricity consumption. With each additional member, the per capita electricity consumption of each household decreases by 5.36 kWh/month, equivalent to a 15% reduction. This result has a small deviation compared to the results estimated in other Asian countries such as China. Summary for policymakers: This study examines how of electricity consumption by Vietnamese households between 2014 and 2018 depends on households size, income and other factors. It utilizes instrumental variables to adjust for the effects of increasing block tariffs. The result confirm the existence of economies of scale in electricity use among Vietnamese households: each additional member in the household decreases the per capita power consumption by 15%. Results imply that the observed social trend towards smaller households may contributes to the electricity demand increase. Indeed, between 2014 and 2020, the average household size in Vietnam decreased, correlating with a large increase in per capita electricity consumption. However, the study finds that diseconomies of scale only explain a small part (5%) of the households electricity demand increase. The majority of the increase is due to other factors, such as the number of households, their income growth, and urbanization.

Keywords: Economy of scale; electricity demand function; tiered pricing; Vietnamese households. (search for similar items in EconPapers)
Date: 2023-11
New Economics Papers: this item is included in nep-ene, nep-reg, nep-sea and nep-tra
Note: View the original document on HAL open archive server: https://enpc.hal.science/hal-04332519v1
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Published in Những vấn đề Kinh tế và Chính trị Thế giới, 2023, 11 (331), pp.63-73

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