Abstract
The problem of energy is one that has plagued the economic growth of Pakistan for decades; the resulting domestic pressure has often led to the misallocation of resources, and therefore should be studied extensively for evidence based policy recommendation. The study in hand aims to envelope and analyze approximate factors responsible for determining electricity demand in the country. The study analyzes the aggregate demand for electricity in Pakistan from 1975-2016, by considering log-run climatic variable affecting electricity demand. The ADF, the Johansen Cointegration, and the ARDL techniques have been applied for the estimation of parameters and analysis. The scientific analysis found that in the short run and long run number of consumers, income (real GDP per capita) square of income and stock of appliances have a significant relationship with the demand of electricity. Where all significant relationships in the long run have a positive relationship with the demand apart from the square of income which may suggest a shift towards alternate means of energy production with a long term sustained growth in income. While, price is found to be insignificant determinant of electricity demand in both short run and long run, which reveals that electricity is considered a necessity by Pakistan’s electricity consumers. In the short run number of consumers, income, squared income, and stock of appliances, all have significant positive relationships with demand, and temperature has an insignificant positive relationship in the short run, but a significant positive relationship in the long run.
Highlights
The very fabric of a society is held together by sufficient if not plenty resources, any resource base must meet the growth of the respective demand
The above results are representative of the fact that there is a short run significant relationship between demand and the number of consumers, and the income, income squared, stock of appliances, and an insignificant relationship in the short run between demand and temperature, all are positive relationships and conform to theory
Where an increase in income may result in an increase in the stock of appliances and their use, in the long run the income squared has a negative and significant relationship with demand because in sustained income increases after a saturation of demand consumers are displaying the tendency to shift to alternate sources of energy, possibly because such sources of energy provide a more stable and continuous supply of power, it remains to be seen whether this shift is towards alternates that are environmentally friendly or not
Summary
The very fabric of a society is held together by sufficient if not plenty resources, any resource base must meet the growth of the respective demand. One of the fundamental physical prerequisites of growth is a consistent supply of energy, where a sufficient base of energy does not exist, the supply will not meet the demand. The measurement of the demand for electricity becomes an extremely important focus for economic development policies. There has been sufficient research for the effect of measuring the demand and the demand elasticity for electricity in Pakistan with respect to the domestic, industrial, and agricultural sectors, a small niche presents itself in recent years with the analysis for the past half-decade missing from popular literature. This paper aims to fill this niche by including the demand analysis years from 1975-2016
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