basic electricity need of households: empirical evidence from china
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Basic Electricity Need of Households: Empirical Evidence from China. Xiaoping He Xiamen University. David Reiner EPRG, University of Cambridge. Content . Background Methodology Empirical analysis Conclusions. I. Introduction. Electricity consumption of China ’ s households . - PowerPoint PPT PresentationTRANSCRIPT
Basic Electricity Need of Households:
Empirical Evidence from China
Xiaoping HeXiamen University
David ReinerEPRG, University of
Cambridge
Content Background Methodology Empirical analysis Conclusions
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0
1,000
2,000
3,000
4,000
5,000
0
3
6
9
12
15
3.49
12.57 13.1612.50
National totalResidential Proportion
TWh %
Electricity consumption of China’s households
Nationaltotal Residential Residential
per capitaTWh TWh kWh
1980 301 11 112012 4976 622 459
Growth 9.2% 13.6% 12.5%
I. Introduction
per cap. Final energy Electricity( kce/year) ( kWh/year)
National 195. 459Urban 225 500Rural 163 414
Urban Rural
Household Consumption of Energy Commodities
Noncommercial energy
• Noncommercial energy plays a significant role in rural areas, with non-commercial energy consumed by rural households being nearly 50%
• Given non-commercial energies included, the energy consumption of urban family is higher than that of the rural in some regions
Electricity price in China
The prices of electricity, set by the government, has been kept steady at a low level.
Electricity consumption of households is subsidized by industry and commerce users
Residential electricity price is politically sensitive, the government is very careful about increasing it.
Coal prices have been deregulated from1992, then the increases of fuel cost in generation can not be transferred to end user.
The “price linkage mechanism”, beginning in 2004 as a solution to the contradictions between the coal and electricity industries, has faced difficulties in execution.
Since July 2012, a new pricing regime for household electricity, the increasing block tariff, started nationwide in China.
Fixed tariffs vs IBTs
IBTs implemented nationwide from 2012, except Tibet and Xinjiang
Before 2012, electricity tariffs were fixed, identical within each province, rarely
adjusted.
kWh/month
Rate(yuan)
Sichuan0-260 0.522
181-280 0.622≥281 0.822
Beijing0-240 0.488
241-400 0.538≥400 0.788
Qinghai0-150 0.377
151-230 0.427≥231 0.677
Debates about the IBTs IBT, comprising various quantities and
charges, has often been promoted and adopted as a solution to address social equity, efficiency, or environmental concerns.
In IBTs, the price of electricity will be low for consumption up to a certain quantity, whereby any consumption exceeding the quantity will be charged a higher price.
In IBT schemes in China, the electricity volume of the first is said to be based on the basic need of household, covering 80% of residential demand.
The ability of IBTs to deliver equity targeting at the poor depends on setting the volume of electricity in the initial block equal to the basic need.
Question: how to determine the electricity volume of the first block ?
II. Methodology
Link between basic energy needs and energy poverty
Methods defining the basic energy needs
Concept of basic needs
Basic needs are “basically linked to the needs of ‘living’ at the most general level ” (UN, 1983).
It is universally recognized that energy service is of centrality for the provision of basic human needs.
No consensus on the amount of energy to meet basic needs, as energy needs vary significantly among countries and regions.
Concept of basic energy needsDiscussions on basic energy needs
have been often found in the literatures on energy poverty.
An energy poverty line specifies a minimum level at which household can be considered non-energy poor, the energy quantity at the minimum level is regarded as the basic need.
Methods to define basic energy need
A. Physical quantity approach Ideology
Defines the energy poverty line (minimum amount of energy demand) based on a basket of energy goods and services.
Disadvantages Difficulties in defining the basket Assumptions on the type of energy consuming appliances, their sizes, efficiencies and utilizations. Arbitrariness in choosing the threshold of energy poverty line; inconsistence in quantifying energy content of the basket
B. Expenditure approaches Expenditure method Expenditure share method
Ideology Examines the
expenditure of household on energy.
Examines the proportion of household expenditure on energy.
The energy expenditure of the household whose expenditure is at the known income-poverty line is regarded as to meet their basic energy needs.
A household is classified as energy-poor if the share of their energy expenditure in income is larger than a specific percentage (e.g. 10%)
characteristics
Assumes that the income poor definitely are energy poor.
Assumes that the income poor definitely are energy poorAssumes the poor spend a higher percentage of income on energy.
Expenditure approaches Advantages
No need to investigate what energy sources and how much of each are actually used by the poor, as income poverty /poverty line is well-defined in most countries.
The data is readily available; the measure technique is relatively simple.
Disadvantages Assumes the energy poverty follows exactly the
same pattern as the income poverty.
Ignores that the energy budget depends not only on the type of energy used and its price, but also the efficiencies and the costs of household appliances.
The preset expenditure or expenditure share is usually an arbitrary figure.
continued
C. Income invariant energy demand approach
Barnes et al.(2010; 2011)Ideology
Defines the threshold of energy poverty as the income decile where household energy consumption is significantly different from that at the previous income decile.
The households below the threshold only consume a bare minimum level of energy for subsistence.
characteristics the definition of energy poverty in concept is
similar to expenditure methods.Advantages
Does not specify any predefined figure as threshold, then no drawbacks of arbitrariness;
The definition of basic needs is based on demand function, easy for quantitative analysis.
III. Basic Electricity Need: empirical analysis based on survey data
Survey Data
Conducted in 2008 and in 2009, covering 1748 households.
Sampled population from households in Beijing, Shanghai, and Guangdong
Data limitation The survey is not been conducted especially for getting energy information. Except electricity consumption, more details on energy are not available, such as the amount of each type of energy , the expenditure on specific fuel, and the quality of energy services.
0.0
05.0
1.0
15P
roba
bilit
y D
ensi
ty
0 200 400 600 800electricity per capita
Kernel density estimate
kernel = gaussian, bandwidth = 5.2304
urban areas
0.0
1.0
2.0
3.0
4.0
5P
roba
bilit
y D
ensi
ty
0 50 100 150electricity per capita
Kernel density estimate
kernel = gaussian, bandwidth = 2.6669
rural areas
25 8
Density estimates of Electricity Consumption
( kWh per capita )
Electricity need varies with income and the control factors :
Xij , control variables , income dummy variables, y splits the
sample into ten categories by the quantiles of per capita income
Modelling electricity demand
Hypothesis: if there exists a basic minimum amount of electricity consumption that a household must maintain to subsist, then electricity consumption up to that amount should be unresponsive to changes in income.
Estimated parametersControl Variables rural urban
Constant -0.9767 9.789Number of family members -0.1450 -0.1780Log of Household living area 0.1438 0.1753Age of household head -0.0055 -0.0001Gender of household head 0.0669 0.1519Education of household head (years) 0.0127 0.0351Distance to the nearest commercial center -0.0041 0.0000Has frequent electricity outage (1= Yes,0=No) -0.1514 -0.0674Latitude of community -0.1156 -0.0600Longitude of community 0.0478 -0.0365Area of agricultural land 0.0004 Amount of Stocks, bonds and deposits 0.0001Household has electricity consumption for production (1= Yes, 0=No) 0.4926 0.3316
Log price of electricity -6.0082 -1.1302Log price of gas -1.7587 -1.4949
Findings about the control variables
Family size and household living area significantly influence the demand for electricity by households in either rural areas or urban areas. Family size has negative impact, while living area has positive impact.
The education level and the gender of household head significantly influence the demand for electricity by households in urban areas rather than in rural areas.
Findings (continued)
The distance from the house to commercial center affects the electricity of rural households rather than urban households.
The latitude significantly affects household electricity demand, but the longitude does not.
Rural families and urban families respond differently to energy price changes. The urban respond negatively to gas price; while the rural respond negatively to electricity price.
Estimates of income dummiesIncom
edecile
Rural Urban
2 -0.0206 0.00853 -0.0505 0.04594 0.0066 0.15045 -0.0380 0.33236 0.1668 0.25357 0.3493 0.37988 0.2923 0.40799 0.3064 0.3943
10 0.4020 0.4646
The changes in electricity consumption at lower levels of income are not as sensitive to slight changes in income as those with changes at higher levels of income. Rural families are less elastic to income than urban families; high-income families are more sensitive than low-income families.
In the case of the electricity consumption, it is far from having been reached a theoretical saturation status.
4000 4500 5000 5500 6000 6500 70000
20
40
60 rural
decile 7 (5300-6667)
kWh
4000 5000 6000 7000 8000 9000 100000
20
40
60
80
100 urbandecile 4 (5250-6938)Polynomial (decile 4 (5250-6938))decile 5 (7133-9600)
kWh
The electricity demand does not respond to income changes until a specific income decile.
Income decile
Rural Urban
Electricity Income Electricity Income
1 10.6 366 38.3 6242 11.4 1068 40.2 25623 10.1 2108 37.7 44304 12.7 2849 44.8 61035 12.8 3669 47.7 82286 15.9 4764 47.8 109947 22.8 6038 54.0 137298 20.3 7884 64.9 172739 24.3 10831 61.3 2326210 27.1 34967 87.6 72943
Electricity consumption by income decile
Rural Electricity vs urban Electricity
Electricity demand of the rural family is much lower, even when its income roughly equal to that of urban family
Electricity consumption per capita at the bare minimum level is 22.8kWh in rural areas, 47.7 kWh in urban areas.
From village to city, the
energy consumption
pattern changes
much
1 2 3 4 5 6 7 8 9 100
20
40
60
80
100
10.610.410.112.712.815.922.820.324.327.138.340.237.744.847.747.854.0
64.961.3
87.6rural
Income decile
kWh
Why the rural electricity need is lower
a. In urban areas, heating /cooling with electricity is popular; the electricity used for entertainment and house electric appliances is greater than in rural areas.
b. In rural areas, many households still consume traditional biomass resources for cooking; electricity is mainly used for lighting and some electric appliances, and the electricity for lighting is larger than in urban areas.
Proportion of Households by Cooking FuelRural Urban
Firewood 56.4% 5.0%Electricity 16.5% 9.3%Gas 21.0% 83.1%Coal 3.0% 1.7%Solar 0.0% 0.2%Biogas 2.0% 0.2%Other 1.1% 0.4%
c. Energies used in rural areas are less convenient and efficient than those used in urban areas.
d. Coal remains an important energy source for heating in rural areas, especially in north China (e.g., Beijing).
e.g. Energy use in Beijing(kce per capita)
Item Total Energy consumption Coal
Residentia
l total665 114
Urban 606 34 Rural 996 568
VI. ConclusionsThe basic electricity need is defined based
on the concept “energy poverty” and estimated from the electricity demand function.
The basic electricity need of rural family is fewer, because the energy consumption pattern changes much from village to city.
A few of household-related factors affect household electricity consumption, such as latitude, living area, family size, energy prices.
Given other factors controlled, the electricity consumption will be income-sensitive at higher income levels.
If there is a decrease in income, electricity demand does not necessarily decrease, although the burden of expenditure on electricity may increase significantly
Given the increasing structure of prices in IBTs , preferential policies on residential electricity should be applied targeted at low-income families.
EndThank you very much!