Optimal dynamic electricity consumption function estimation: an institutional experimental evidence from Guangzhou, China (1949-2016)

Abstract

This research demonstrates from a dynamic optimal perspective that electricity consumption for a metropolitan area is a function of economic output, electricity consumption habits, and electricity demand management reform. The empirical results include: (1) an unidirectional Granger causality exists linking economic output to electricity consumption; (2) given electricity consumption habits under the context of the electricity demand management reform, an economic output increase of 1% results in the increase of electricity consumption by 0.22%, and (3), after demand management has been implemented, economic output continues to increase electricity consumption, but at a lower rate than prior to reform. These empirical results imply that the ‘conservation hypothesis’ is upheld over the long-run at the regional level in Guangzhou from 1949 to 2016.