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Analysis of Electricity Demand in Ethiopia Using Partial Adjustment and ARIMA Modeling
(Addis Ababa University, 2011-05) Abebaw, Misganew; Gotu, Butte (PhD)
This paper examined demand for electricity in Ethiopia as a function of real gross domestic product per capita, real price of electricity and population growth rate between the period 1976 and 2010. Partial adjustment and ARIMA models were used to provide electricity demand estimation and forecast, and resul ts were compared with government projections. In the partial adjustment model, we found that income and population growth are the main determinants of electricity demand in Ethiopia, while the effect of electricity price is insignificant. Moreover, elasticities of electricity demand in Ethiopia are low (inelastic demand) meaning that, the responsiveness of consumers' to price, income and population growth rate changes is limited. From the comparison of ARIMA (1, 2, 1) model forecasts and government projection, except reference scenario, we found that the government electricity demand projections are consistently higher for moderate and targeted scenario than forecasted values of ARIMA (1, 2, 1) model. Key words: Partial adjustment model, Elasticity, Co-integration Analysis, ARIMA