Dynamic demand for residential electricity in Taiwan under seasonality and increasing-block pricing

Abstract

This paper studies the dynamic demand for residential electricity in Taiwan employing a monthly panel data set, composed of 19 counties and spanning the period from 2007:01 to 2013:12. The partial adjustment model used addresses the endogeneity of the electricity price that results from the increasing-block pricing. The estimated results show that there is a significant seasonal difference in the demand for electricity between the summer and non-summer periods. Both the adjustment speed and own price elasticity during the summer months are found to be lower than those in the non-summer months due to the hot weather in summer. It is easier for consumers to adjust their electricity consumption in response to the changes in electricity pricing during the non-summer time. The estimated inelastic short-run and long-run income effects show that electricity is a necessity for consumers. Moreover, the controversial electricity-conservation policies are found to be ineffective measures for reducing electricity consumption in Taiwan.