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.