Modelling Residential Electricity Demand for Kenya

Abstract

This paper investigatesthe relationship between Kenya electricity consumption, real disposable income and residential electricity prices. The research employs the Engle and Granger two-step procedure and ECM method to a time series data over the period from 1980 to 2009 to analyze the electricity demand. The model suggests a co-integration with long-run price and income elasticity of -0.095 and 0.1 respectively with 4% increase in consumption of other non-economic factors.It can therefore be concluded that the estimates of the analysis are indicative of a rising electricity requirements as Kenya achieves higher GDP growth rates.

Keywords: Electricity demand, Error correction Models, short-andlong-run elasticities