Demographic effects on residential electricity and city gas consumption in the aging society of Japan

Abstract

Japan has been confronted with two demographic forces, declining fertility rates and lengthening life spans, which give rise to the increasing ratio of the elderly (aging society), the decline in population and the prevalence of nuclear families. This study empirically analyzes the demographic effects on residential electricity and city gas consumption in Japan. Our analysis presents the following main results. First, the aging of the society decreases the electricity demand but does not affect the city gas demand significantly. Second, the decrease in population with the prevalence of nuclear families increases the electricity demand but decreases the city gas demand. The direction of the demand for each alternative depends on the balancing of the first and second effects. Third, the analysis also shows clear results about the own- and cross-price effects. Ongoing energy market reforms for price suppression would increase energy demand with possible substitutability between the two energy sources. Our case study of Japan is also applicable to other countries that will have just started to experience the similar demographic pattern of an aging society with energy market deregulation.