Electricity Pricing and Subsidy for Energy Conservation in Developing Country: Evidence from Natural Experiment

2020 Fiscal Year Research-status Report

• Project/Area Number: 20K13498
• Research Institution: Waseda University
• Principal Investigator: Dendup Ngawang 早稲田大学, 政治経済学術院, 助教 (00844549)
• Project Period (FY): 2020-04-01 – 2023-03-31
• Keywords: Margina price / average price / block pricing / subsidy / electricity / inefficiency

Outline of Annual Research Achievements

The preliminary results on whether households respond to marginal or average price and subsidy has been completed so far. Our results show that households are responding to marginal price as predicted by economic theory but in contrast to the recent evidence from California, United State of American and Canada. At the same time, the results also show that households respond positively to average price too, showing inefficiency in electricity pricing in developing countries. In order to check the whether households are responding to subsidy or not, we conducted bunching estimates as well as difference in difference estimates following the Shaffer (2020). Both the results show that rural households have responded to subsidy by substantially increasing their consumption. The subsidy has benefited low consumers (i.e defined based on the electricity consumption before the introduction of the subsidy). I have also completed conducting household and merged the electricity consumption data with census data conducted in 2017.

Current Status of Research Progress

1: Research has progressed more than it was originally planned.

Reason

This is because, I was able to conduct household survey to collect household electricity meter number during the covid period in Bhutan. This has allowed me to merge large data set of electricity consumption with household census data, which allowed me proceed with my research more smoothly. Further, I had opportunity discuss about my research plan with senior professors at Waseda University and had received number of useful comments and suggestions. In addition, I was also able to hire since Spring 2021, excellent research assistants and this really helped me in progressing my research more smoothly.

Strategy for Future Research Activity

My next plan is to finalize the results as soon as possible. In particular, currently, I am in the processing estimating the elasticity using bunching method and I am plan finalize this results as soon as possible. Further, it is my plan to complete the first draft the paper by the end of this year. Thereafter, I would like to present this present in the conference and further refine the manuscript. In the beginning of the next financial year, I would like to submit the paper to American Economic Journal or Journal of Public Economics.

Causes of Carryover

This is partly because I could not travel myself to conduct the survey to Bhutan because of the COVID. Further, I could not invite or attend any international related conferences to present preliminary results due to COVID.