Electricity demand price elasticity in China based on computable general equilibrium model analysis

Based on the CGE model, this paper simulates the impact of electricity price adjustment on demand for electricity, and the simulation results show the range of electricity elasticities of different consumers. The elasticities of the high power-consuming sectors are relatively larger. However, the absolute values of the price elasticities are less than one. Furthermore, this paper quantitatively analyses the price elasticity of different categories of users, which are classified according to the objectives of China’s electricity price reform. The elasticity absolute value of Industry & Commerce is around 0.018, that of Residents is around 0.300 and that of Agriculture is around 0.066. Finally, the price elasticities of different consumers in 2005 and 2007 are calculated through the CGE model, and it is discovered that the price elasticity absolute values in 2007 are less than that in 2005. The analytical results of this paper can provide corresponding support for the formulation of electricity pricing mechanisms for the developing countries.

Research highlights
► The CGE model is a new method to analyze the price elasticity of electricity demand in China or other developing countries.
► Combining the horizontal analysis and vertical contrast, the horizontal analysis is from the point of different industries and different power consumers, and then vertically contrasts the result in 2005 and in 2007.
► The data in the SAM table is from the latest Input-Output Table in China, so the conclusions in the paper can reflect the latest trend of different industries and different power consumers.
► The analytical results of this paper can provide corresponding support for the formulation of electricity pricing mechanisms for the developing countries.