Estimating the Demand for Electricity in Urban Indonesia
Indonesia is interested in reforming electricity pricing to move towards market prices. Part of that reform will be the acceleration of use of pre-‐paid meters, which use a different pricing schedule, reduce collection costs for the electric company, and reduce non-‐technical losses. Furthermore, in Indonesia, energy policy is an important topic: Indonesia has traditionally had high subsidies for energy (both fuel and electricity), which have been reduced considerably in recent years due to the high cost of sustaining them, as well as inequality concerns. Understanding the implications of changes in electricity subsidies on electricity consumption is therefore a first-order policy issue in Indonesia.
The study aims to provide rigorous evidence related to current and future energy demand and supply considerations by:
- Testing the impact of transitioning households from post-‐paid to pre-‐paid meters to allow for direct estimation of the impacts of pre-paid meter on non-‐technical losses, consumption, and other important outcomes.
- Estimating the demand curve for electricity by experimentally varying its price to be able to obtain shorter and longer run estimates of the demand curve, where the longer run one allows for consumers to alter their holdings of energy using appliances.
- Testing whether current poverty targeting which in part bases anti-‐poverty programs on electricity utilization stifles electricity demand, disincentivizing investment in productive assets.