Preprint Article Version 1 NOT YET PEER-REVIEWED

The Relationship between Residential Electricity Consumption and Income: A Piecewise Linear Model with Panel Data

Yanan Liu 1,2,3 , Yixuan Gao 1,2,3,4 , Yu Hao 1,2,3 , Hua Liao 1,2,3,*
  1. School of Management and Economics, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
  2. Center for Energy and Environmental Policy Research, Beijing Institute of Technology, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
  3. Collaborative Innovation Center of Electric Vehicles in Beijing, 5 Zhongguancun South Street, Haidian District, Beijing 100081, China
  4. University of New Hampshire, 56 College Rd, Durham, NH 03824, USA
Version 1 : Received: 13 October 2016 / Approved: 14 October 2016 / Online: 14 October 2016 (09:53:13 CEST)

A peer-reviewed article of this Preprint also exists.

Liu, Y.; Gao, Y.; Hao, Y.; Liao, H. The Relationship between Residential Electricity Consumption and Income: A Piecewise Linear Model with Panel Data. Energies 2016, 9, 831. Liu, Y.; Gao, Y.; Hao, Y.; Liao, H. The Relationship between Residential Electricity Consumption and Income: A Piecewise Linear Model with Panel Data. Energies 2016, 9, 831.

Journal reference: Energies 2016, 9, 831
DOI: 10.3390/en9100831

Abstract

There are many uncertainties and risks in residential electricity consumption during the economic development. Knowledge of the relationship between residential electricity consumption and its key determinant—income—are important to the sustainable development of electric power industry. Using panel data from 30 provinces for the 1995-2012 period, this study investigates how residential electricity consumption changes as incomes increase in China. Previous studies typically used linear or quadratic double-logarithmic models imposing ex ante restrictions on the indistinct relationship between residential electricity consumption and income. Contrary to those models, we employed a reduced piecewise linear model that is self-adaptive and highly flexible and circumvents the problem of “prior restrictions.” Robust tests of different segment specifications and regression methods are performed to ensure the conservatism of the research. The results provide strong evidence that the income elasticity was approximately one, and it remained stable throughout the estimation period. The income threshold at which residential electricity consumption automatically remains stable or slows has not been reached. To ensure the sustainable development of the electric power industry, introducing higher energy efficiency standards for electrical appliances and improving income levels are vital. And government should emphasize electricity conservation in industrial sector rather than in residential sector.

Subject Areas

residential electricity consumption; income; piecewise linear model; China; robust tests

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