Electricity Demand by the Commercial Sector in Kuwait: An Econometric Analysis

Abstract

This paper models and estimates electricity demand by the Kuwaiti commercial sector, using an error correction model. It also simulates the estimated model under three scenarios and presents an analysis of the results.The empirical results indicate that short‐ and long‐run electricity consumption and the level of economic activity are interrelated. The forecasts show that electricity consumption varies directly with economic growth. They also suggest that an increase of 100 per cent in nominal electricity prices will lead to a reduction in commercial sector electricity demand of 45 per cent by the year 2010. The simulation of the model under the different scenarios demonstrates that the potential for energy conservation exists in the commercial sector.