Macroeconomic, demographic and climatic indicators for household electricity consumption model in Cyprus

Abstract

ABSTRACT By 2030 Cyprus committed to reduce greenhouse gas emissions by 40% and increase renewables’ energy share by 19% according to the European engagements. Difficulties appear due to the continuous increase in domestic energy consumption, the large dependency on fossil fuels and the adverse climate. A number of macroeconomic, demographic and climatic indicators that influence Cyprus’s electricity consumption (EC) was analysed for years 2000–2018 using augmented Dickey–Fuller unit root test and the autoregressive distributed lag model (ARDL). The ARDL model revealed that an increase in population could radically increase EC in the long-run and short-run. Results posit that a 1% increase in urban population, electricity price and unemployment decrease domestic EC in the long-run by 17.25%, 0.48% and 0.30%, respectively. In the short-run smaller elasticities were found because time was too short for adjustments to be made. However, their decrease could not outweigh the population growth effect on increasing domestic EC.