Estimating demand function for electricity in industrial sector of Iran using structural time series model (STSM)

Abstract

This case study estimated an electricity demand function for industrial sector of Iran by applying the structural time series technique to quarterly data for 2000q1-2011q4. In addition to identifying the size and significance of the price and output elasticities, this technique also uncovers UEDT. It is found that the estimated long-run and short-run industrial output elasticities are respectively, 0.85 and 0.36 and the estimated long-run and short-run industrial energy price elasticities are -0.47 and -0.27, respectively. The results suggest that the nature of the trend is not linear and deterministic but stochastic in form. The UEDT for the electricity usage of the industrial sector shows an upward slope.