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Energies 2016, 9(10), 831; doi:10.3390/en9100831

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

1,2,3
,
1,2,3,4
,
1,2,3
and
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
Department of Natural Resources and the Environment, University of New Hampshire, 56 College Road, Durham, NH 03824, USA
*
Author to whom correspondence should be addressed.
Academic Editors: Vincenzo Dovì and Antonella Battaglini
Received: 11 August 2016 / Revised: 24 September 2016 / Accepted: 11 October 2016 / Published: 17 October 2016
(This article belongs to the Special Issue Energy Policy and Climate Change 2016)
View Full-Text   |   Download PDF [1742 KB, uploaded 17 October 2016]   |  

Abstract

There are many uncertainties and risks in residential electricity consumption associated with economic development. Knowledge of the relationship between residential electricity consumption and its key determinant—income—is important to the sustainable development of the 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 validity 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. Government should also emphasize electricity conservation in the industrial sector rather than in residential sector. View Full-Text
Keywords: residential electricity consumption; income; piecewise linear model; China; robust tests residential electricity consumption; income; piecewise linear model; China; robust tests
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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.

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