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The Scientific World Journal
Volume 2012 (2012), Article ID 395629, 6 pages
http://dx.doi.org/10.1100/2012/395629
Research Article

Estimating Elasticity for Residential Electricity Demand in China

1Department of Techno-Economic Research, Development Research Center of the State Council, Beijing 10010, China
2School of Economics, Renmin University of China, Beijing 100872, China

Received 28 July 2012; Accepted 27 August 2012

Academic Editors: C. Bin, T. Han-Song, and C. Zhan-Ming

Copyright © 2012 G. Shi et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

Residential demand for electricity is estimated for China using a unique household level dataset. Household electricity demand is specified as a function of local electricity price, household income, and a number of social-economic variables at household level. We find that the residential demand for electricity responds rather sensitively to its own price in China, which implies that there is significant potential to use the price instrument to conserve electricity consumption. Electricity elasticities across different heterogeneous household groups (e.g., rich versus poor and rural versus urban) are also estimated. The results show that the high income group is more price elastic than the low income group, while rural families are more price elastic than urban families. These results have important policy implications for designing an increasing block tariff.