Household energy demand: a theoretic and econometric specification

One of the major concerns in assessing the impact of energy-conservation policy is the manner in which its impact is distributed across various segments of the population. Accurate assessment of these effects for any actual or proposed policy requires the existence and use of a model which estimates and simulates the response of households to energy policy changes. The Comprehensive Human Resources Data System (CHRDS) simulates these issues. The approach starts with a large sample survey of households and projects the sample to a future year with an updating of demographic, economic, and energy-using characteristics. Energy expenditures change over time as a function of prices directly, consumption changes induced by price changes, conversions of heating and water-heating fuel type, appliance ownership, appliance efficiency, the age and distribution of housing stock, insulation efficiency, auto ownership patterns, and the economic and demographic characteristics of the population. This paper develops the required theoretical model of household energy demand and presents an appropriate econometric specification. Section II presents the basic model of household energy demand proposed for estimation with the National Interim Energy Consumption Survey (administered to 3000 households in 1978-1979). Section III proposes explicit forms for the demand equations and presents the econometricmore » specifications. Section IV discusses the incorporation of the proposed model into the existing CHRDS model. Section V outlines how the model could be extended to deal with the long run, while Section VI reviews the advantages of the proposed model over most other formulations, and then discusses ways in which the proposed model could be generalized and extended.« less