Determinants of household electricity consumption in South Africa

Abstract

Little is known about residential electricity demand in developing countries. In order to shed some light on this topic, this study combines data from South Africa's recent Income and Expenditure Survey with data from the National Energy Regulator of South Africa to estimate the determinants of residential energy demand. Combining electricity tariff data from the regulator with expenditure survey data from households provides an opportunity to explore the determinants of the demand for electricity. Due to the large number of zeroes in the dataset, a two-part model is employed. The results indicate that household income and electricity price are major demand determinants, and for the full two-part model, electricity demand is normal, as well as downward sloping, although inelastic in both cases; as expected, substitute fuel use impacts these elasticities. We also find that access to free basic electricity, a policy designed to improve access to electricity does what is expected. It is associated with increases in the probability that households purchase electricity and reduces total expenditure on electricity. Household demand is also higher for appliance-rich households in urban areas, especially if there are more household members and they live in larger dwellings.