Elasticities of Electricity Demand in Urban Indian Households

Energy demand, and in particular electricity demand in India has been growing at a very rapid rate over the last decade. Given, current trends in population growth, industrialisation, urbanisation, modernisation and income growth, electricity consumption is expected to increase substantially in the coming decades as well. Tariff reforms could play a potentially important role as a demand side management tool in India. However, the effects of any price revisions on consumption will depend on the price elasticity of demand for electricity. In the past, electricity demand studies for India published in international journals have been based on aggregate macro data at the country or sub-national/ state level. In this paper, price and income elasticities of electricity demand in the residential sector of all urban areas of India are estimated for the first time using disaggregate level survey data for over thirty thousand households. Three electricity demand functions have been estimated using monthly data for the following seasons: winter, monsoon and summer. The results show electricity demand is income and price inelastic in all three seasons, and that household, demographic and geographical variables are important in determining electricity demand, something that is not possible to determine using aggregate macro models alone.Residential electricity demand, price elasticity, income elasticity

Energy use and energy access in relation to poverty

This paper looks at how access and use of energy are related to poverty. Different approaches to how energy poverty might be measured are presented. One approach involves the estimation of basic energy needs of a household based on engineering calculations and certain normative assumptions. The second looks at poverty in relation to access to different energy sources. An alternative approach is then provided that combines the elements of access and consumption of energy in order to examine how these relate to the well being of households. Examining well being in terms of both these dimensions – access to clean and efficient energy sources; and sufficiency in terms of the quantity of energy consumed, could be an important complementary measure of poverty. The consumption dimension includes non-commercial consumption and thus includes self-produced and bartered products. The access dimension can serve as an indicator of the extent of market integration, or more specifically, as an indicator of the opportunity to join the modern market economy.

Fuel Choices in Urban Indian Households

This paper applies an ordered logit model to fuel choices and patterns of cooking fuels in urban Indian households. A large microeconomic dataset is employed to carry out the analysis. The results show that in addition to income, there are several socio-demographic factors such as education and sex of the head of the household, which are important in determining household fuel choice. In addition, the model performs better when information on the shares of different fuels in total useful cooking energy are included, and this suggests that it is important to incorporate multiple fuel use patterns in modeling fuel choice in the Indian context.

Elasticities of electricity demand in urban Indian households

In the past, several electricity demand studies have been published for India based on aggregate macro data at the country or sub-national/state level. Since the underlying theory of consumer demand is based on the behaviour of individual agents, the use of micro data, which reflects individual and household behaviour, more closely, can shed greater light on the nature of consumer responses. In this paper, seasonal price and income elasticities of electricity demand in the residential sector of all urban areas of India are estimated for the first time using disaggregate level survey data for about thirty thousand households. Three electricity demand functions have been econometrically estimated using monthly data for the winter, monsoon and summer season in order to understand the extent to which factors like income, prices, household size and other household specific characteristics, influence variations observed in individual households’ electricity demand. The results show electricity demand is income and price inelastic in all three seasons, and that household, demographic and geographical variables are significant in determining electricity demand

Fuel choices in urban Indian households

This paper applies an ordered discrete choice framework to model fuel choices and patterns of cooking fuel use in urban Indian households. The choices considered are for three main cooking fuels: firewood, kerosene, and LPG (liquid petroleum gas). The models, estimated using a large microeconomic dataset, show a reasonably good performance in the prediction of households' primary and secondary fuel choices. This suggests that ordered models can be used to analyze multiple fuel use patterns in the Indian context. The results show that lack of sufficient income is one of the main factors that retard households from using cleaner fuels, which usually also require the purchase of relatively expensive equipments. The results also indicate that households are sensitive to LPG prices. In addition to income and price, several socio-demographic factors such as education and sex of the head of the household are also found to be important in determining household fuel choic

A simulation-based estimation model of household electricity demand and appliance ownership

Understanding how electricity demand is likely to rise once households gain access to it is important to policy makers and planners alike. Current approaches to estimate the latent demand of unelectrified populations usually assume constant elasticity of demand. Here we use a simulation-based structural estimation approach, employing micro-data from household surveys for four developing nations, to estimate responsiveness of electricity demand and appliance ownership to income considering changes both on the intensive and extensive margin. We find significant heterogeneity in household response to income changes, which suggest that assuming a non-varying elasticity can result in biased estimates of demand. Our results confirm that neglecting heterogeneity in individual behavior and responses can result in biased demand estimates

Explaining Income Inequality Trends in Countries: An Integrated Approach

What can we say about systematic global and broad regional trends in the drivers of income inequality in countries? In order to address this question, this work takes an integrated approach in that it looks at a broad set of countries and examines a broad set of determinants. We thus model technological progress, non-resource trade flows, the education distribution, labor vs. capital income as well as heterogeneity in public social spending and analyze the relation to three income inequality measures in Advanced and Developing Economies. Our findings indicate the main factors adding to increasing inequality globally to be technological progress and trade with high-income countries. Trade with low-income countries, public spending on health and decreasing shares of people without any formal education, on the other hand, had significant equalizing effects on the income distribution. The estimated effects of the education distribution, public education spending and the labor income share are highly region specific and thus indicate the importance of disentangling global effects.Series: INEQ Working Paper Serie

Application of an alternative framework for measuring progress towards SDG 7.1

Global progress towards Sustainable Development Goal 7.1: 'By 2030, ensure universal access to affordable, reliable and modern energy services' continues to be measured by mere access to energy carriers, using binary indicators that inadequately reflect the multi-dimensional nature of the goal. In this work, we describe and apply an alternative framework (AF) to track critical dimensions of energy provisioning and household capabilities that aligns more closely with the original SDG 7.1 target wording. We provide new empirical evidence from ten countries describing the extent to which the current indicators underestimate energy poverty and neglect decent access. We find that households officially counted as having access to modern energy sources, in many instances, still benefit only from minimal energy services, receive unreliable energy supply, and struggle with being able to afford energy services they need to enjoy a decent standard of living. We also find that poorer households are systematically over-represented in this population and are more likely to suffer multi-dimensional constraints when counted served by the current indicators. Notwithstanding challenges in data collection and standardisation, we argue that we must improve on binary indicators for measuring progress towards SDG 7.1, to pave the way for agenda setting and policy development that recognises and addresses broad inequities in household capabilities to use modern energy towards achieving a decent living standard

Explaining Income Inequality Trends in Countries: An Integrated Approach

What can we say about systematic global and broad regional trends in the drivers of income inequality in countries? In order to address this question, this work takes an integrated approach in that it looks at a broad set of countries and examines a broad set of determinants. We thus model technological progress, non-resource trade flows, the education distribution, labor vs. capital income as well as heterogeneity in public social spending and analyze the relation to three income inequality measures in Advanced and Developing Economies. Our findings indicate the main factors adding to increasing inequality globally to be technological progress and trade with high-income countries. Trade with low-income countries, public spending on health and decreasing shares of people without any formal education, on the other hand, had significant equalizing effects on the income distribution. The estimated effects of the education distribution, public education spending and the labor income share are highly region specific and thus indicate the importance of disentangling global effects.Series: INEQ Working Paper Serie

Electricity access and rural development: Review of complex socio-economic dynamics and causal diagrams for more appropriate energy modelling

The causal relationships between electrification and development of poor, rural communities are complex and contextual. The existing literature focuses mainly on the impact of rural electrification and electricity use on local socio-economic development, while the reverse feedbacks of various social and economic changes on electricity demand and supply have not been fully characterized. Most electricity access impact assessments assume linear, one-way effects and linear growth in electricity demand. However, the projections rarely match the reality, creating challenges for rural utilities. From a modelling perspective, the lack of attention to dynamic complexities of the electricity-development nexus prevents the appropriate modelling of electricity demand over time and, hence, informed planning for and sizing of power plants. With the goal to improve modelling of the electricity-development nexus, we undertake a comprehensive review and extensive analysis of the peer-reviewed literature on electricity access and its impact on rural socio-economic development, and vice versa. We characterize and describe the nexus between electricity access and development through graphical casual diagrams that allow us to capture, visualise and discuss the complexity and feedback loops. Based on this, we suggest guidelines for developing appropriate models able to include and simulate such complexities. Our analysis confirms that electricity use is interconnected through complex casual relations with multiple dimensions of socio-economic development, viz. income generating activities, market production and revenues, household economy, local health and population, education, and habits and social networks. The casual diagrams can be seen as a first step of the conceptualization phase of model building, which aims at describing and understanding the structure of a system. The presence of multiple uncertain parameters and complex diffusion mechanisms that describe the complex system under analysis suggests that systems-dynamic simulations can allow modelling such complex and dynamic relations, as well as dealing with the high uncertainties at stake, especially when coupled with stochastic approaches