Figure 2.
Residential electricity consumption elasticity with respect to GDP per capita.
Therefore, the results show that GDP per capita increases in recent years are contributing to
reduce residential electricity use, which could be related to the fact that the population is replacing
their appliances with more efficient ones. In this sense, it is worth highlighting that, in 2012, 100% of
the population had the most common appliances, with cooking being the highest percentage of annual
energy consumption [
73
]. Furthermore, the household electrical equipment consumption accounts for
75% of the total electrical energy consumed in the dwellings [
74
].
Subsequently, as the income growth does not seem to be the cause of the residential electricity
growth in the latter years analyzed, there may be some other underlying causes. In this sense, the results
show that the time trend effect is positive and significant, which may be explained by the increasing
urbanization and the lifestyle changes. Along this line, Gupta [
75
] states that the lifestyles in cities of
the developing countries are becoming energy intensive. Likewise, Karanfil and Li [
76
] found that
urbanization is a relevant factor of electricity use in all income levels, except for the high-income level,
with it also being the most important driver of electricity use in upper-middle income countries, such
as Algeria [
77
]. According to the World Bank [
64
] database, about 70.72% of the Algerian population
lived in urban regions in 2015, while the urbanized segment of the population was at 39.5% in 1970.
Additionally, the import coefficient is positive and significant at a 10% level in the long-run
estimate. Although in the short-run the residential electricity consumption elasticity with imports is
negative, in the long-run the sign changes into positive. However, although imports could lead to more
efficient appliance purchases in the short-run, these could also provide more appliance purchases in
the households over time, generating rebound effects in the long-run. Thus, it is worth noting that
Algerian consumer goods imports were valued at US$13.3 million in 2015, representing 25.65% of total
imports, while in 1992 they were valued at US$1.6 million, representing only 19% of total imports [
78
].
Finally, results in Table
6
also show that the elasticity with respect to residential electricity
prices is negative, significant and lower than one. These results are in line with those obtained in
Kamaludin [
72
], referring to developing countries. The author concludes that electricity is assumed
to be a necessity good and therefore is relatively inelastic. Along this line, the study by Arisoy and
Ozturk [
79
] found low values for price elasticity of residential electricity, implying that electricity is
a necessary good for households. Likewise, price elasticity has also been found non-significant when
Energies 2018, 11, 1656
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estimating the effect of energy price on transport energy use [
10
]. In the case of Algeria, it is worth
noting that residential electricity prices, despite increasing in some periods, are low as they are still
being greatly subsidized by the Algerian authorities. Therefore, it would be adequate to continue
increasing them to market prices. Recently, the Algerian energy regulator has augmented electricity
and gas tariffs for high-voltage electricity use. Nevertheless, it has not increased tariffs for low-voltage
electricity, which is used in households [
80
]. The elimination of these subsides in the residential sector
would make electricity consumption more sensitive to prices, and therefore responsible electricity
consumption could be addressed. Fattouh and El-Katiri [
81
] state that electricity subsidies distort price
signals, inducing large energy consumption inefficiencies. Therefore, they have negative implications
on electricity efficiency.
4.4. Multicollinearity and Stability
In order to avoid multicollinearity, all variables in the model were converted to deviation with
respect to their mean, as previously mentioned in the methodology section. Table
5
shows the VIF
values for the GDP per capita and its squared and cubed transformed values. The VIF values are lower
than 5, thereby no multicollinearity is present between y, y
2
and y
3
, in natural logs.
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