Demand, supply and partial equilibrium analysis of electricity energy pricing for Turkish market

Özdemir, Asena
Electricity energy is a fundamental commodity for all sectors of the economy. For this reason, estimating the factors and their impacts on electricity consumption and production are important to maintain sustainability in electricity energy market. The aim of the study is to determine the association between main macroeconomic and sectorial indicators with electricity consumption and production. For estimating electricity demand, annual electricity consumption, Gross Domestic Product (GDP), electricity transmission and distribution losses, industry value added, annual average electricity prices and urbanization ratio are used as variables. On the other hand, for estimating electricity supply variables annual electricity production, gross profit and labor supply in electricity sector, electricity transmission and distribution losses, annual average electricity prices, GDP and investments in electricity sector are used. At the first time impact on each series is investigated by using time series approach. Econometric models for both electricity supply and demand are estimated through Ordinary Least Squares (OLS), Generalized Method of Moments (GMM) and Autoregressive Distributed Lags Approach (ARDL) by using annual data for the period from 1970 to 2010. Within ARDL procedure; vector error correction models, impulse-response functions and variance decomposition analyses are performed to detect the degree of association among the variables and their sensitivity to the mean reverting fluctuations. Furthermore, by using estimated demand and supply equations, partial equilibrium analysis are performed and equilibrium annual average electricity prices are extracted and compared to actual prices by using statistical measurement methods.
Citation Formats
A. Özdemir, “Demand, supply and partial equilibrium analysis of electricity energy pricing for Turkish market,” M.S. - Master of Science, Middle East Technical University, 2013.