Electricity price and residential electricity demand in Vietnam

Vietnam’s electricity consumption has increased more than 20 times over the last 3 decades. As a consequence of the low energy price policy, the demand for electricity in both the residential and industrial sectors has risen at twice the rate of annual economic growth. Thus, there is an urgent need...

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Bibliographic Details
Published inEnvironmental economics and policy studies Vol. 22; no. 4; pp. 509 - 535
Main Author Phu, Le Viet
Format Journal Article
LanguageEnglish
Published Tokyo Springer Japan 01.10.2020
Springer Nature B.V
Subjects
Demand side management
Economic development
Economic growth
Economics
Economics and Finance
Elasticity
Electric power demand
Electricity
Electricity consumption
Electricity pricing
Energy management
Energy policy
Environmental Economics
Environmental policy
Financial institutions
Households
Industry
Instruments
Market prices
Mathematical analysis
Pricing policies
Property
Registration
Research Article
Residential energy
Social Policy
Surveying
Vietnam
Residential electricity demand
Q21
Increasing block rate
Q28
Instrumental variables
Simultaneity
Q40
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Summary:Vietnam’s electricity consumption has increased more than 20 times over the last 3 decades. As a consequence of the low energy price policy, the demand for electricity in both the residential and industrial sectors has risen at twice the rate of annual economic growth. Thus, there is an urgent need to characterize the properties of this demand and its determinants. This study presents a first household-level estimate of the demand for residential electricity in Vietnam using a 2015 World Bank household registration survey. Estimating a demand function with instrumental variables to address the simultaneity of price and quantity demanded due to an increasing-block-rate pricing policy, we find that the demand for electricity is almost unitarily elastic to average price and even more so to marginal price. Both income and substitution elasticities are low but positive, indicating that electricity is a necessity and that there is limited substitutability between electricity and other sources of energy. This finding implies that pricing instruments could be very effective for demand side management in Vietnam.
Bibliography:ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
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ISSN:1432-847X
1867-383X
DOI:10.1007/s10018-020-00267-6