Examining the determinants of electricity consumption in the nine South African provinces : a panel data application

Abstract

South Africa has been experiencing a series of power cuts since 2008 due to the state‐owned electricity distributor's (Eskom) insufficient power generation capacity. The ongoing energy crisis has negatively impacted the growth and development of the South African economy. Therefore, it is imperative to have an insight into what explains electricity demand in an attempt to address issues facing the energy sector and electricity access at the provincial level. The study's main objective is to examine the determinants of electricity demand in the nine South African provinces from 1995 to 2019 to highlight regional intervention and policy implementation potential. The empirical examination was carried out through two‐panel estimation techniques, namely Fixed Effects and the Pooled Mean Group, to account for time‐ invariant unobservable individual aspects that can be associated with the observed explanatory variables and to provide both short‐ and long‐run coefficients thus allowing the intercept, the slope coefficients and the regression for electricity demand to be province‐specific in the short‐run. The results demonstrate the importance of examining the demand for electricity at the provincial level and providing critical province‐specific developments that can potentially influence economic growth.