Residential electricity demand in Taiwan

This paper examines the residential demand for electricity in Taiwan as a function of household disposable income, population growth, the price of electricity and the degree of urbanization. Short- and long-term effects are separated through the use of an error correction model. In the long-run, the income elasticity is unit elastic. The own-price effect is negative and inelastic. In an error correction framework, the short-run income and price effects are small and less than the long-run effects. Cooling degree-day effects have a positive impact on short-run consumption. We have used a proxy variable, urbanization, to capture economic development characteristics and changes in electricity-using capital stocks not explained by income. The variable provides significant explanatory power to the model both in the short-and long-run. We interpret it as controlling for economic development factors not captured by the pure income effect and we think it holds promise for explaining residential electricity consumption in other developing countries. (C) 2003 Elsevier B.V. All rights reserved.