Modelling residential electricity demand in the GCC countries

• Published in: Energy economics Vol. 59; pp. 149 - 158
• Main Authors: Atalla, Tarek N., Hunt, Lester C.
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier B.V 01.09.2016; Elsevier Science Ltd
• Subjects: Consumers; Consumption; Demand; Economic models; Efficiency; Electric appliances; Electric power demand; Electricity; Electricity consumption; Electricity pricing; Energy consumption; Energy demand; Energy economics; Energy policy; GCC residential electricity demand; GDP; Gross Domestic Product; Guanosine diphosphate; Household appliances; Human behavior; Impact of weather and exogenous underlying energy demand trend (UEDT); Income; International cooperation; Marketing; Policy making; Price elasticity; Price increases; Prices; Real variables; Residential energy; Stochasticity; Structural time series model; Studies; Weather; Impact of weather and exogenous underlying energy demand trend (UEDT); Q43; C22; Structural time series model; GCC residential electricity demand; Q41
• DOI: 10.1016/j.eneco.2016.07.027
• ISSN: 0140-9883

This paper aims at understanding the drivers of residential electricity demand in the Gulf Cooperation Council countries by applying the structural time series model. In addition to the economic variables of GDP and real electricity prices, the model accounts for population, weather, and a stochastic underlying energy demand trend as a proxy for efficiency and human behaviour. The resulting income and price elasticities are informative for policy makers given the paucity of previous estimates for a region with particular political structures and economies subject to large shocks. In particular, the estimates allow for a sound assessment of the impact of energy-related policies suggesting that if policy makers in the region wish to curtail future residential electricity consumption they would need to improve the efficiency of appliances and increase energy using awareness of consumers, possibly by education and marketing campaigns. Moreover, even if prices were raised the impact on curbing residential electricity growth in the region is likely to be very small given the low estimated price elasticities—unless, that is, prices were raised so high that expenditure on electricity becomes such a large proportion of income that the price elasticities increase (in absolute terms). •Residential electricity demand for Bahrain, Kuwait, Oman, and Saudi Arabia•Estimated residential electricity demand relationships using STSM/UEDT approach•LR income and price elasticities from 0.43 to 0.71 and −0.16 to zero respectively•Impact CDD elasticities from 0.2 to 0.7•Estimated UEDTs suggest exogenous electricity using behaviour.