Elasticity Estimates of Urban Resident Demand for Electricity: A Case Study in Beijing

Based on the monthly micro-level data of Beijing urban households from 2002 to 2009, we estimate the price and income elasticities of residential electricity demand among income groups with both the almost-ideal-demand-system (AIDS) and the linear double-logarithmic (LDL) model specifications. The estimated price elasticity is close to unit elasticity and increases as income grows, and income elasticity is low and positive and approximates to zero as income increases. Thus, we conclude that it might be effective by using pricing policies for demand-side management to adjust the electricity consumption of high-income groups, while increasing price will severely hit low-income groups. In addition, low-income groups will consume more electricity if their income increases. This suggests that while tariff reform is necessary, supporting policies are needed. In this regard, either directly subsidizing low-income families or rationally setting the price levels of different tariff blocks can be helpful.EI07-81229-12482