An Estimation of Household Electricity Demand’s Function in Kabul City

An Estimation of Household Electricity Demand’s Function in Kabul City (1388- 1394)


Hossain Ali Karimi, Alireza Mohseni, Najibullah Arshad


 Electricity has more important role than other sources of energy in production and consumption.  It is one of the key elements of socio – economic decisions. The aim of this research is to estimate the demand for residential electricity: case study Kabul city. Considering the literature and the structure of electricity in Kabul, the researcher assesses the key determinants of residential electricity demand. Using the monthly time series data for the period of 2009 – 2016, the researcher estimated the determinants of electricity demand through OLS approach.  In addition to time series analysis of the data, the stationary of data and post estimation tests have been done to make sure that the results of the model are not against the assumption of classical linear regression. The findings of this research reveal that (self) price of elasticity, income elasticity of demand for electricity, cross elasticity of demand for gas; diesel and petrol are 0.49, 0.64, 0.25, 0.75 and 0.07 respectively. The finding shows inelastic demand for residential electricity and the ability of diesel and petrol that can be used as substitute goods. Additionally, the results show that the impact of temperature as dummy variable is statistically significant which highlights that temperature has significant impact on the demand of residential electricity in Kabul City. The negative sign of gas as substitute goods for electricity reveals that despite of decreases in its price, the consumption of electricity increased which indicate simultaneous consumption of both mentioned goods. Further, it shows that gas is not an appropriate substitute of consumption of electricity.  Low value of beneficiaries’ coefficient indicates that they have less impact on the consumption of residential electricity. The reasons can be consumers’ welfares, lack of utilizing electric tools which increase the cost of electricity and finally the problem of proper electricity supply. In contrast to demand theory, the coefficient of electricity estimated in the model is positive. Based on the analysis, one of the reasons can be control of electricity prices by government of Afghanistan.

Keywords: Demand for residential electricity, OLS, elasticity, time series

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