Record Details

Estimating the price elasticity for demand for electricity by sector in South Africa

South African Journal of Economic and Management Sciences

Field Value
Title Estimating the price elasticity for demand for electricity by sector in South Africa
Creator Inglesi-Lotz, Roula Blignaut, James
Description This paper analyses electricity consumption patterns in South Africa in an attempt to understand and identify the roots of the current electricity crisis. This is done by investigating various economic sectors’ responses to price changes using panel data for the period 1993–2004. Positive and statistically significant price elasticities over this period were found for the transport (rail) and commercial sectors while there are positive, but small and statistically insignificant responses to price changes in the agriculture and mining sectors. Only the industrial sector responded to changes in electricity prices according to theory, namely illustrating negative demand elasticities. This sector, however, dominates electricity consumption resulting in aggregate demand elasticities that are negative. These results explain, in part, the current electricity crisis. Given the historic low level of electricity prices in conjunction with, on the whole, a real price decline, i.e. price increases lower than the inflation rate; there was no major incentive to reduce electricity consumption and/or to be efficient. This result supports the notion that prices do have an important signalling effect in the economy. Hence, the electricity prices should be considered not only from an economic growth or social vantage point, but also from a supply and technocratic perspective, which includes environmental factors such as CO2-emissions. Prices should not be determined without considering the system-wide implications thereof. 
Publisher AOSIS Publishing
Date 2011-12-06
Type info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion Peer-reviewed Article
Format application/pdf
Identifier 10.4102/sajems.v14i4.134
Source South African Journal of Economic and Management Sciences; Vol 14, No 4 (2011); 449-465 2222-3436 1015-8812
Language eng