Energy efficiency improvements and industry transition: An analysis of China's electricity consumption

Abstract

Limited empirical evidence exists on the role of electricity intensity of residential income and disposable income in China's electricity consumption. Furthermore, little attention has been paid to the variation in the growth rate of electricity consumption. We develop a Logarithmic Mean Divisia Index model to examine factors that affect electricity consumption and whether there are structural changes impacting electricity consumption. The drivers of slowing electricity consumption in China between 2007 and 2019 are quantified. We find that China's electricity consumption is closely associated with economic growth during the current New Normal period 2013–2019. Decelerated electricity consumption rate is linked to adjustments in industrial structure and a decline in energy intensity. Decreasing the electricity intensity of residential income also contributed to the decelerated rate. In 2014 there was a clear structural break in the growth rate of China's electricity consumption. We conclude that the decline in the electricity consumption growth rate is structural, and the low average annual growth rate will be sustained if nascent energy efficiency improvements and industry transition continue. Therefore, both electricity consumption and its influencing factors should be monitored continuously. Policies should be aimed at promoting energy efficiency and optimizing industrial structure.