Impact of electricity pricing strategy on residential energy consumption decisions in China: empirical evidence from a household survey

ABSTRACT

In this study, the direct impact of knowledge about the electricity pricing policies on residents’ electricity saving behaviour and the indirect impact of these pricing strategies on residential consumers’ fuel choices are analysed by adopting a traditional two-stage-least-squares model. Moreover, due to the different levels of affordability of energy, differences between rural and urban households are also examined. Estimations are based on an analysis of data from 3653 households from the Chinese General Social Survey of 2015. We find that energy sources with higher health risks – raw coal and briquettes – are more likely to be used in rural households than in urban households. However, our results confirm that applying for time-of-use (TOU) tariffs can help rural residents reduce their electricity expenditure, and thus increase their ability to consume cleaner energy – LPG instead of coal. Similarly, choosing TOU and possessing a higher understanding of tiered electricity pricing (TEP) significantly improves urban residents’ electricity saving behaviours. Urban residents with higher energy saving awareness are more likely to purchase energy sources with more convenience and less carbon emissions – natural gas instead of LPG. Finally, we suggest that more information on the TEP pricing scheme should be offered to rural residents to improve their energy saving knowledge levels.

KEYWORDS:

• Energy saving
• consumer behaviour
• tiered electricity pricing
• time-of-use

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Notice of the General Office of the State Council on dealing with the peak-time electricity shortage issue on summer time (2004). Accessed May 29 2020. http://www.gov.cn/xxgk/pub/govpublic/mrlm/200803/t20080328_32384.html (in Chinese).

2 Definition of ‘whether provinces/regions implemented the TOU pricing’ is based on the latest consumer electricity price policy announced by National Development and Reform Commission of each region before 2014.

3 As described in Question E105 in the questionnaire of CGSS 2015, TOU pricing policy generally does not automatically apply for residential customers, as they must bring a valid certificate to the nearest electricity business hall to apply for activation. After the application is successful, a half-price calculation is adopted in the low electricity consumption period (such as 23:00–6:00 a.m.).

4 Since the 1950s, households in northern China have been supplied with central heating systems, but these were not available in southern China.

5 Provisions for statistically dividing urban and rural areas. Accessed March 26 2021. http://www.stats.gov.cn/tjsj/tjbz/200610/t20061018_8666.html (in Chinese).

6 Usage rates of energy sources in this study are defined as share of households responded ‘yes’ when they were asked about whether the household is using that kind of energy source in the surveyed households.

7 As shown in Table 2, 1035 of the 2181 surveyed urban residents (47.46%) answered the question about their knowledge about TEP, and 32.2% of residents that answered the question claimed they had knowledge about their family's own electricity consumption level under the TEP. Similarly, 25.07% of rural residents answered the question and 29.3% of them answered that they have such knowledge on TEP.

8 As shown in Table 2, 1181 of the 2181 surveyed urban residents (54.15%) answered the question about their choice of TOU, and 21.5% of urban residents that answered the question claimed they had applied for TOU pricing. Similarly, 28.26% of rural residents answered the question and 5.5% of them claimed they had applied for TOU pricing.

9 Commission for Energy Regulation. “Electricity Smart Metering Technology Customer Behavior Trials (CBT) Findings Report.” Accessed March 26 2021. http://www.cer.ie/GetAttachment.aspx?id=fa5f2b08-9774-4878-9617-01709eda5bfc.

10 According to summary statistics in Table 1, nearly 17.9% of surveyed households have access to central heating systems (central heating = 1).

11 According to IPCC (2016), the carbon emission coefficients for LPG is 0.5042 t C/t standard coal.

12 The variables $\mathrm{o}\mathrm{n}\mathrm{e}\mathrm{m}\mathrm{e}\mathrm{t}\mathrm{e}\mathrm{r}$ and $\mathrm{c}\mathrm{e}\mathrm{n}\mathrm{t}\mathrm{r}\mathrm{a}\mathrm{l}\mathrm{h}\mathrm{e}\mathrm{a}\mathrm{t}$ were omitted in the estimation model for coal gas in columns (3) and (7), and natural gas in columns (4) and (8). It is due to a lack of variations in the value of these variables for the coal gas and natural gas estimation. Specifically, only 1.3% of rural residents use coal gas, and 2.5% of rural residents use natural gas, while the usage rates of households’ own electricity meter and central heating system are 97.8% and 2.4%, separately.