Estimating and forecasting residential electricity demand in Odisha

The growing demand for electricity has put pressure on generation of electricity based on fossil fuel, resulting in emission of carbon dioxide. In order to design policy for demand side management, proper knowledge on determinants of electricity demand as well as prediction of future demand is required. However, study on estimation and forecasting of residential demand in developing countries like India has received less attention. This study is the first attempt to estimate and forecast residential electricity demand in the state of Odisha, which is the pioneer of electricity reform in India. It employs ARDL model to estimate residential electricity demand; while ARIMA, VAR and VEC models are employed to forecast future demand. The results show that income and price of electricity are significant determinants of residential electricity demand. The higher price elasticity compared to income elasticity reveals that price could be used as an effective instrument for demand side management. The forecast results show that VAR has the lowest error, which predicts per capita residential electricity demand to be double by 2030-31. This would help the policy makers to plan for demand side management and electricity generation so as to avoid shortage of electricity supply.