Exploring drivers of sectoral electricity demand in Indonesia

ABSTRACT

This study estimates the influence of income, electricity price, oil price, urbanization, and Asian economic crisis to electricity demands in residential, industrial, and commercial sectors of Indonesia using autoregressive distributed lag (ARDL) method. Our estimations reveal that electricity demands in all sectors during the period of 1969–2015 are significantly affected by income and urbanization in which the demands in all sectors are elastic to urbanization but inelastic to income. On the other hand, electricity price only significantly affects residential electricity demand while oil price does not have significant influence on electricity demands in all sectors. The electricity demands in residential and commercial sectors are also significantly inelastic to the number of electricity customers while Asian economic crisis in 1998 only affects industrial electricity demand. These findings are like most previous studies for other country cases but not to previous Indonesian studies that had suffered from the cointegration issues.

KEYWORDS:

• ARDL
• electricity customers
• time series analysis
• urbanization impacts

Notes

¹ For an example, the estimation of residential electricity demand with crisis dummy: LEC = −4.92 + 0.56*LY + 0.32*LCUST + 1.40*LURBAN – 0.23*LPE + 0.02LPO – 0.03CRISIS. ^*) means significance at 1%.