Regional Electric Power Demand in Japan

Author Name AKIYAMA Shuichi  (Kushiro Public University) /HOSOE Nobuhiro  (National Graduate Institute for Policy Studies)
Creation Date/NO. July 2007 07-J-028
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In assessment and review of regulatory reforms of the electric power market, price elasticity is one of the most important parameters which characterize the market. However, people have seldom estimated the elasticity for Japan but have just assumed it as small as 0.1 or zero without examining empirical validity of such a priori assumptions. We estimated regional power demand functions for nine regions to quantify the elasticity and found short-run price elasticity be 0.06627-0.32551 and long-run price elasticity be 0.11326-0.69075. Inter-regional comparison of our estimation results suggests price elasticity in rural regions is larger than that in urban regions. Popular assumptions of small elasticity like 0.1 could fit for Japan's aggregate power demand but would not fit for power demand functions focusing on respective regions. Furthermore, assumptions with smaller elasticity values like 0.01 and zero could not be statistically supported.

JEL Classification Number: Q41, L94, R15

Keywords: power demand function, price elasticity, regional demand