Price and income elasticities of residential electricity demand in Brazil and policy implications

• DOI: 10.1016/j.jup.2021.101250
• Publication Date: 2021-06-26T08:02:11Z
• Authors: Luís Oscar Silva ...; Inara Rosa Amorim; Vinícius de Araúj...; Marcelo Santana S...; Francisco Gaudênc...; Eduardo Oliveira ...; Ednildo Andrade T...
• Keywords: Consumption; Electricity demand; Hydroelectricity; Econometric model

Abstract The research objective was to estimate Brazil's residential electricity consumption behavior, given alterations in price and income. A balanced panel with monthly data was used for the 27 states of the country between 2004 and 2019, distributed into the five regions of Brazil. This approach enabled the calculation of price elasticity and income parameters, in the short and long terms, for both national and regional scenarios. They were used, as control variables, the average temperature, which was not used in previous research due to the use of a database with a higher level of aggregation, and the rainfall, that can be considered an important parameter in the Brazilian case where most of the electricity is obtained from hydroelectric generation, however, it has never been used in previous studies. The econometric model was estimated using the Generalized Method of Moments (GMM), version System - GMM (SY - GMM), to avoid dynamic bias of the panel and a serial correlation problem, which has not been considered in previous studies in Brazil. The results show that, although the short and long-term elasticities for the national scenario are similar to previous studies when analyzed regionally, the parameters proved to be quite different from previous research. Based on the results, adjustments were proposed for the Brazilian electricity price policy.