Demand of the Population on Heat and Electricity Markets of the Russian Far East: limitations and consequences

Svetlana Naiden,Olga Dyomina,V.A Stennikov,M Negnevitsky,P Changwei,N.A Yusifbeyli,S.P Filippov,J.-Y Yoon,B Sereter,S.V Alekseenko,N.I Voropai,C Rehtanz,F.-J Lin

doi:10.1051/e3sconf/202020905012

Abstract

The paper examines the specifics of organization of the electricity and heat energy markets depending on the population behavior in the Far East. The region maintains a regular monopoly, where vertically integrated companies provide services while keeping surplus supply; consumer has no ability to influence the demand in the conditions of imposed prices. The paper estimated the price elasticity of demand on electricity for the population of Khabarovsk Krai, which confirmed the low degree of dependency of consumption from either income or the scale of the tariff. Furthermore, the paper estimated the potential growth of population expenses on electricity in two scenarios: 1) keeping energy tariffs on inflation level and 2) keeping current average annual growth rates of tariffs. There is a differentiation of availability of services depending on the level of income. There is also a need for social support of population from budgets depending on the growth rates of tariffs on electricity and heat energy.

Highlights

The theoretical assumptions on effective functioning of the markets show that consumers receive price signals from manufacturers and suppliers, compare them with their own budget capacities, and make decisions over volume of demand on goods or services
The industry specifics of such markets are reflected in the lack of price elasticity of demand on energy for some consumers, for whom the economic incentive for decreasing energy consumption is weak
Despite growth of nominal income per capita in 2013-2019 (141.5%), its real volume has decreased and is even lower than it was in 2013. This is made worse by poverty reproduction in, for example, northern parts of Khabarovsk Krai, which have high tariffs on electricity and heat energy and there are few opportunities presented on local job markets unlike southern parts of the region

Summary

Introduction

The theoretical assumptions on effective functioning of the markets show that consumers receive price signals from manufacturers and suppliers, compare them with their own budget capacities, and make decisions over volume of demand on goods or services. Unlike the general Russian electricity market, which is competitive, where consumers sometimes can change the supply volume depending on electricity prices (pricedependent consumption was introduced in 2017), the Far East remains a regulated monopoly, where vertically integrated companies provide services and consumers are basically hostages of imposed prices. If energy saving policy were to be introduced, considering surplus energy system capacities, lack of new high-volume consumers – the decreasing demand in the region would cause increasing fixed costs and, most likely, increasing price for consumers in the Far East This means that consumers’ behavior on the markets of electricity and heat is defined primarily by the specifics of market organization and energy qualities. Since the volume of heat consumption in most houses in the country is calculated with standards depending on the living area and its qualities, the analysis of price elasticity of demand is not expedient, unlike electricity, the consumption of which is estimated by meters

Estimation of price elasticity of demand

Estimating the consequences of tariffs growth for population

Findings

Conclusions