Does the current tiered electricity pricing structure still restrain electricity consumption in China's residential sector?

Abstract

The tiered electricity pricing (TEP) policy in China was implemented for 10 years. With the rapid economic growth and changing in residential consumption behavior, whether the initial design is still effective for electricity conservation and residential affordability is a worthy topic. By survey data of China Family Panel Studies project, this paper examined the policy effect of TEP from perspective of the threshold settings, long-term electricity conservation and residential affordability. Firstly, the Extended Linear Expenditure System was proposed to evaluate the basic needs of residents, and the results showed that the threshold value was still reasonable. Secondly, the long-term effect of TEP on electricity consumption for different tiered residents was estimated by DID method. Although the third-tier residents showed more obvious electricity-saving behaviors compared with the second-tier residents, the policy effect on residents’ electricity-saving behavior was weakening and the expected policy effect was gradually being released. Lastly, the further assessment of the residents' welfare loss and electricity expenditure showed that the policy reform was still within the affordable range of the residents. In order to maintain the effectiveness of the policy, the government should further optimize the TEP structure to promote residential electricity saving behavior.