Empirical analysis of the relationship between electricity demand and economic uncertainty

Akarsu, Gülsüm
The determination of the factors that influence electricity demand and the estimation of price and income elasticities are very crucial for both effective policies and consistent demand projections. The purposes of this dissertation are to investigate the determinants of electricity demand, to obtain the price and income elasticities, and to examine the effect of economic uncertainty/volatility on the electricity demand. We model electricity demand as a function of electricity price, income, urbanization ratio, weather variables, and economic volatility. This dissertation includes two panel data applications: one for the panel of provinces of Turkey covering the period from 1990 to 2001, and another one for the panel of 27 OECD countries over the period between 1985 and 2007. We employ panel data techniques. In order to check for the robustness of our results, we use different proxy measures of economic uncertainty obtained from the estimation of ARCH/GARCH models. Results show the positive significant effect of the industrial production volatility on the electricity consumption of Turkey, and the significant adverse short run impact of oil price volatility on the electricity consumption of OECD countries. In addition, based on the results, such as the presence of feedback effects between energy and economy and limited responsiveness of electricity demand to electricity prices, as well as, considering environmental issues and supply security, accompanying to the pricing policies, the countries should give priority to the energy efficiency programs, diversification of energy resources, environmentally friendly clean electricity generation technologies, and transformation of their industries to the less-energy intensive structure.


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Citation Formats
G. Akarsu, “Empirical analysis of the relationship between electricity demand and economic uncertainty,” Ph.D. - Doctoral Program, Middle East Technical University, 2013.