Household Energy Prices Research Articles

Price and Income Elasticities of Hungarian Household Energy Demand: Implications for Energy Policy in the Context of the Energy Crisis

The energy crisis that began in the second half of 2021, exacerbated by the Russian-Ukrainian war, created unexpected difficulty for European Union Member States in terms of shaping their energy policies. Hungary was one of the most vulnerable countries, whose economic development was fraught with severe risk due to the strong dependence on Russian energy sources and regulated energy prices for households, significantly slowing down the transition to green energy. The sharp change in energy prices due to the introduction of a price cap in 2013-2014 and the partial adjustment in 2022 draws attention to the situation of Hungarian energy demand. This study describes the absolute short-term price elasticities of Hungarian household natural gas and electricity demand and gas and electricity cross-price and income elasticities of the former for income deciles between 2010 and 2021 using the midpoint percentage method. The results show that electricity demand is more elastic than gas demand, implying that Hungarian household consumers are more responsive to changes in electricity prices than those of gas. In addition, low-income Hungarian households are more sensitive to changes in both of the latter than high-income households, while no consistent pattern is identified in the relationship between income and energy demand. Accordingly, the study recommends the implementation of a multi-tariff pricing strategy based on the energy burden of the income deciles. This should particularly target the first two deciles, which are the most vulnerable and sensitive to energy price changes.

Energy policy trade-offs in Poland: A best-worst scaling discrete choice experiment

This study applied a discrete choice experiment using best-worst scaling questions (multi-profile, BWS case 3) to estimate the trade-offs which a sample of the Polish population is willing to make for energy reform regarding carbon reduction. Attributes considered in the study are CO2 emissions reduction, National energy independence, Employment impact, Time needed for policy transition, and Impact on household energy prices. Respondents (n = 639) choose the best and worst of the presented policy options to fit a rank-ordered logit model. This study reveals concern about climate change among respondents, but that they prioritize energy prices and employment in their choice of preferred energy policy with significant variation across groups. A key distinction is revealed in the preferences by age cohort in which youngest (<25years old) respondents had the strongest WTP coefficients, particularly for CO2 and time to transition. Stronger and more urgent desires for CO2 reduction policies were also identified among the decisions of female respondents, those having more education, those without children, and middle and upper income groups. The respondents’ choices also revealed consistent loss aversion in all attributes presented in the choice experiment.

The Residential Energy Cost Reduction Programme in Hungary

The article outlines the positive and negative effects as well as the policy context of Hungary’s residential energy cost reduction programme initiated in 2013. This programme has occupied a permanent and high-profile place on Hungary’s political agenda and has been shaping the country’s economic policy, energy policy and the everyday lives of Hungarian households. Both quantitative and qualitative methods are applied. The logarithmic mean Divisia index (LMDI) method is applied to decompose the absolute change in residential energy consumption between 2010 and 2017. The results show that decreasing energy prices for households had a positive impact on their energy use only in the first few years of the programme’s implementation. The authors conclude that the programme was realised without the necessary policy background. A significantly declining ratio of residential expenditure on energy services in total expenditure, decreased inflation rate and considerably improved socio-economic situation of the majority of the population are identified as positive effects. However, the programme discourages energy conservation and energy efficiency, erodes the competitiveness of renewables, reduces capital formation in the energy sector, deteriorates security of supply, and increases energy prices for non-household customers

Auswirkung der letzten Gesetzesänderungen auf Energiepreise für Haushalte in Polen

The liberalization of the electricity market, in terms of creating a guarantee of free choice of energy supplier for the consumer, requires public authorities to intervene in the prices of energy transmission and distribution services. However, the question is how much intervention is necessary and in what situations it can occur. This article looks at the regulation of household electricity prices in Poland (tariff setting) and then, by presenting the legislative changes in 2018 and 2019, shows how much state intervention in the Polish electricity market has come to pass since then, in particular, intervention in the setting of energy prices. The article assesses these measures and analyses the provisions of the Act on the compensation of energy companies by a state fund in relation to state aid issues. It also attempts to answer the question of whether the intervention was necessary or whether the President of the Energy Regulatory Office, within the scope of his powers, could have prevented the effects of a sudden increase in energy prices for households. The article also raises the question of the future of energy prices and raises questions about market disturbances.

Economic and Efficiency Analysis of China Electricity Market Reform Using Computable General Equilibrium Model

China’s electricity industry has been undergoing a process of regulatory reform. This study aims to analyse the impact of liberalization on the electricity market assuming different degrees of scope of the reforms by applying a computable general equilibrium (CGE) model. In this paper, we consider the three sub-sectors of the electricity industry, namely generation, transmission and distribution. We assume that the reform will phase out the entry barriers on the generation side and allow for competition on the distribution side, while keeping the transmission side under regulation. The results showed that the reform could enhance efficiency in the electricity sector and reduce energy prices for households. Introduction of a complete competition model would decrease welfare by 5.394 billion yuan, if contrasted to a limited competition model. The composite energy price would decline under both scenarios, whereas the quantity of energy consumed by the households would go up. This research, thus, contributes to literature on the economic effects of China’s electric power market reform, and can be used as a case study to support policy decisions for the decision-makers.

Household energy prices and inequality: Evidence from German microdata based on the EASI demand system

This paper studies the distributional effects of rising energy costs for households. In contrast to most of the previous literature, our specification differentiates between electricity and heating demand and still models other consumption goods in realistic detail. We use a yet unexplored data-set on household expenditures in Germany and extend the recently developed EASI demand system for the analysis of inequality and welfare at the individual and social level. The EASI system reveals non-linearity of Engel curves which – when neglected – can lead to biased estimates of distributional effects. We find that increases in heating prices are more regressive than those in electricity. Furthermore, current proposals for social tariffs are found to be less effective than targeted compensation schemes.

Hungarian Energy Prices in an OECD Comparison

The goal of the study is to assess the effect of the utility cost reductions announced by the Hungarian government in 2012 on Hungarian energy prices. The effects are discussed in an OECD comparison. It is concluded that the government price control has resulted in a 15% steeper price reduction occurring 5-7 quarters earlier, compared to other OECD countries. The price reductions saved around 202 billion HUF for Hungarian households in 2014, which was around 0.63% of the GDP. If prices are compared to the monthly average wages however, household energy prices are still high in Hungary. One of the costs of the reduction in household energy prices was an increase in energy prices for industry: the industry/household price ratio is highest among OECD countries in the case of natural gas, and third highest for electricity.

Efficiency for Sustainability—Smart Energy Management in Social Housing

An average energy consumption distribution in household at the worldwide level illustrates that more than three quarters of total consumption is contributed to room heating and almost 12% to water heating for all the living necessities. Although a slow fall of domestic energy consumption has occurred in the recent 20 years (from 1990 to 2011) with a regular decrease between ?1.2% and ?1.4%/year per dwelling as a result of a decrease income corresponding to the economic crisis in 2008, whereas energy prices for households has increase since 2004, the energy cost of paying especially for space heating and domestic hot water (DHW) supplying is still going up. At the EU level, the building sector including residential, commercial and other service buildings is regarded as the key to greater energy efficiency, because according to statistics the final energy consumption for building sector has taken the largest proportion about 40% until 2020, which is apparently higher than the share in transportation sector by 32% and industry sector by 24%. In the scope of the ongoing research and investigation on energy efficiency in residential fields and its impact on environment and climate, how to investigate smart energy management methods for the promotion of sustainable consumption and green living patterns has been already paid much attention, however it has to be studied further and thoroughly, especially among energy consumer groups whose energy costs have no or just little relevance or dependence on major income source, which leads to a lack of energy saving awareness by users. Energy consumers living in social housing buildings represent this kind of energy consumer group which receive the governmental relief fund as their family income in a great measure, they have different culture, educational and age backgrounds. This paper presents firstly some research results based on authors’ practical experiences on the projects about energy efficiency in social housing buildings in European countries, which is supposed to be introduced in the aspects of subjective and objective energy saving potentials. It is proposed to be able to provide valuable and referential advices exchange our experience on a sustainable development in affordable housing.

Regulation, efficiency and equilibrium: A general equilibrium analysis of liberalization in the Turkish electricity market

Turkish electricity sector has been undergoing significant regulatory reforms since 2001 and competition was introduced to some extent. This paper examines potential impacts of full liberalization on efficiency and competition in the electricity market using an applied computable general equilibrium (CGE) model and a counter-factual simulation. Simulation results imply enhanced efficiency in the electricity sector, reduced household energy prices, and gains in output and welfare by 0.5–1.1 percent of GDP. The paper also explains possible factors that lead to differences between estimated effects and actual results. With changing institutional background and legal framework, political pressures tend to dominate efficiency gains.

Public‐Sector Price Reforms in Transition Economies: Who Gains? Who Loses? The Case of Household Energy Prices in Poland

Public‐Sector Price Reforms in Transition Economies: Who Gains? Who Loses? The Case of Household Energy Prices in Poland

The Welfare Effects of Raising Household Energy Prices in Poland

We examine the welfare effects from increasing household energy prices in Poland. Subsidizing household energy prices, common in the transition economies, is shown to be highly regressive. The wealthy spend a larger portion of their income on energy and consume more energy in absolute terms. We therefore rule out the oft-used social welfare argument for delaying household energy price increases. Raising prices, while targeting relief to the poor through a social assistance program is the first-best response. However, if governments want to ease the adjustment, several options are open, including: in-kind transfers to the poor, vouchers, in-cash transfers, and lifeline pricing for electricity. Our simulations show that if raising prices to efficient levels is not politically feasible at present and social assistance targeting is sufficiently weak, it may be socially better to use lifeline pricing and a large price increase than an overall, but smaller, price increase.

Reforming electricity rates: Benefits to low-income households

The electricity rate reforms proposed in the Public Utility Regulatory Policies Act reflect the quest for an energy policy which encourages conservation, efficiency, and equity. Focusing on equity concerns, this research examines the relative effectiveness of lifeline and time-of-day rates in easing the burden of rising household energy prices among the low-income population. Lifeline rates establish a minimum number of kilowatt hours (kWh) required for basic necessities and a special low rate for these kWh. Time-of-day rates provide lower electricity prices to those households using electricity during off-peak generating hours. The data indicate that lifeline rates would assist low-income households in general, with the greatest benefits going to poor households with small numbers of members and older heads of household. Time-of-day rates would immediately benefit smaller households and those with older household heads. Some lifestyle changes, in the form of appliance use patterns, would be required among the low-income population if they are to benefit from time-of-day rates.