Residential Electricity Consumption In China And Its Determinants

With the development of social economy and the improvement ofpeople’s living standards, the proportion of residential electricityconsumption (REC) in the total electricity consumption becomes larger,and the influence of REC on China’s energy and environmental securityis also growing bigger and bigger. In order to build the socialistecological civilization, the conflict between the residential electricityconsumption and energy savings must be resolved. Most of existingpolicies and studies on the electricity consumption are mainly for theproduction filed. Because reliable study on the REC is inadequate, it isdifficult to propose pertinence measure.Through a series of studies on the status, determinants, intervenemethods of REC in China, This paper tries to provide help to thesubsequent studies and policy making in the field of REC.This paper mainly includes the following contents and conclusions.First, we analyze the status of China’s power market through literaturestudy. Study shows that China’s power system reform is basicallystagnant, and most goals of "No.5file" in2002failed to be achieved.And there are some problems in the electricity price formationmechanism, e.g. structural distortion and the overall level is on the lowside. And the living electricity price is low and possesses the character of social welfare, so a careful consideration is absolutely necessary beforechanging the living electricity prices.Second, using LMDI method and decomposition analysis, this paperidentifies four key factors including demographic effects, urbanization,social atomization and electricity consumption intensity that contribute tothe increase of residential electricity consumption (REC). Results showthat increased electricity consumption intensity is the primary driver forREC increment across the country. While demographic, urbanization andsocial atomization do not have a strong explanation power for the currentREC growth, their impacts tend to increase. Besides, we found there aresignificant differences about the influences of the four factors betweenthe major economic regions.Third, using dynamic panel data and error correction model, thispaper tries to explain that how price and income influence REC, and forthe first time constructs urban and rural model respectively, and identifiesthe difference of elasticity between the short and long term. Results showthat the income elasticity is a function of income, and the relationshipbetween income and REC is like EKC. Besides, short term price elasticityis insufficient in both urban area and rural area, but long term priceelasticity increases, and is greater than1in the rural area. Finally, there isa significant difference between the urban and the rural area.Based on these conclusions, this paper provides some policy suggestions on industry policy, research management, formationmechanism and implementation of electricity price.