Relationship between electricity consumption and economic growth of Guangdong Province in China

Abstract

Guangdong is a province with the most electricity consumption (EC) and the fastest economic growth in China. However, there has long been a contradiction between electricity supply and demand in Guangdong and this trend may exist for a long time in the foreseeable future. Therefore, the research on the relationship between EC and economic growth of Guangdong is of very important practical significance to the formulation of relevant policy. In this paper, the econometrics method of granger causality test and co-integration test is used to analyze the relationship between EC and economic growth of Guangdong from 1978 to 2010. The results indicate that there is unidirectional causality between the economic growth and the EC, and the growth of gross domestic product (GDP) and gross industrial output value (GIOV) is the impetus to promote the growth of installed capacity (ICAP) and the EC. Therefore, the appropriate restraint of excessive growth of power industry will not necessarily slow down economic growth. There has been a long-term stable equilibrium relationship between the EC and the economic growth. When the GDP and GIOV grows 1 unit respectively, the EC of Guangdong province will increase 0.97 and 0.64 unit respectively. The long-term marginal utility of the EC is more than 1.