How do urban households in China respond to increasing block pricing in electricity? Evidence from a fuzzy regression discontinuity approach

• Published in: Energy policy 2017-06, Vol.105, p.161-172
• Main Authors: Zhang, Zibin, Cai, Wenxin, Feng, Xiangzhao
• Format: Article
• Language: English
• Subjects: C54; Consumers; Consumption; D12; Difference-in-differences; Discontinuity; Electric rates; Electricity; Electricity consumption; Electricity demand; Electricity pricing; Energy conservation; Energy consumption; Energy policy; Fuzzy regression discontinuity; Households; Increasing block pricing; L94; Price elasticity; Pricing policies; Q41; Regression analysis; Residential energy; Urban areas
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2017.02.025

China is the largest electricity consumption country after it has passed the United States in 2011. Residential electricity consumption in China grew by 381.35% (12.85% per annum) between 2000 and 2013. In order to deal with rapid growth in residential electricity consumption, an increasing block pricing policy was introduced for residential electricity consumers in China on July 1st, 2012. Using difference-in-differences models with a fuzzy regression discontinuity design, we estimate a causal effect of price on electricity consumption for urban households during the introduction of increasing block pricing policy in Guangdong province of China. We find that consumers do not respond to a smaller (approximately 8%) increase in marginal price. However, consumers do respond to a larger increase in marginal price. An approximately 40% increase in marginal price induces an approximately 35% decrease in electricity use (284kWh per month). Our results suggest that although the increasing block pricing could affect the behavior of households with higher electricity use, there is only a limit potential to overall energy conservation. •Estimate electricity consumption changes in response to the IBP in China.•Employ quasi-experimental approach and micro household level data in China.•Households do not respond to a smaller increase in marginal price.•40% increase in marginal price induces a 35% decrease in electricity use.