Estimating Demand Function for Electricity in the Industrial Sector of Iran using Structural Time Series Model (STSM)

This study investigates the relationships among electricity consumption, real economic activity, real price of electricity, real price of natural gas and the underlying energy demand trend (UEDT) for the industrial sector of Iran. To achieve this goal, an electricity demand function for industrial sector of Iran is estimated by applying the structural time series technique to annually data for the period from 1981 to 2011. In addition to identifying the size and significance of the price and output elasticities, this technique also uncovers UEDT. It is found that the estimated long-run and short-run industrial value added (output) elasticity is respectively, 0.85 and 0.36 and the estimated long-run and short-run industrial energy price elasticity is -0.47 and -0.27, respectively. Long-run and short-run cross elasticities of natural gas are 0.09 and 0.11, respectively. The results suggest that the nature of the trend is not linear and deterministic but stochastic in form. The UEDT for the electricity usage of the industrial sector shows an upward slope. This upward slope of the UEDT suggests that either energy efficient equipment has not been introduced in these sector or any energy efficiency improvements due to technical progress is outweighed by other exogenous factors.

کلیدواژه ها:

Industrial Electricity Demand ، Energy Demand ، Modelling ، Structural Time Series Model (STSM) ، Elasticities