Determinants of residential electricity demand: evidence from Japan

Abstract

Purpose This paper aims to estimate electricity demand functions in Japan’s residential sector. Design/methodology/approach The authors use a partial adjustment model and empirically analyze regional residential electricity demand by using data on 47 Japanese prefectures. Findings The results reveal that the price elasticity of residential electricity demand during the analytical period (1990-2010) is remarkably different among prefectures, depending on the magnitude of floor space per household. In addition, this study finds that price elasticity is high compared with income elasticity, implying that residential electricity demand changes with rates. Furthermore, an analysis of factors influencing electricity demand in the residential sector shows that increasing electricity demand growth in each region can be attributable mainly to declining electricity rates and increasing number of households. Research limitations/implications These results suggest that monitoring the electricity rates and the number of households is important for forecasting future residential electricity demand at region. Originality/value The study considers the impact of the number of households on overall electricity demand and identifies other factors contributing to growth in residential electricity demand. The findings can be used to derive projections for future electricity demand.