Evaluation of Energy Price Liberalization in Electricity Industry: A Data-Driven Study on Energy Economics

Abstract

This study aims to evaluate the effects of price liberalization on energy consumption intensity, because price liberalization leads to improved productivity, energy consumption management, and consumption reform. Although the energy consumption of large-scale factories and industries has increased dramatically, and the energies losses have an increment in the power transmission lines, this policy can result in decreasing the energy consumption intensity due to the changes in consumption patterns. If there is a correlation between two variables, the price can be a valid variable to control cost and increase consumption efficiency. The augmented Dickey–Fuller (ADF) and the Chi-squared tests are also employed to investigate the maneuverability of these variables in the first-order contrast. In this case study, the energy consumption intensity response to price changes using the data gathered between 1988–2020, has gained a confidence interval of these reactions at 95%. The proposed vector autoregressive (VAR) model has forecasted the action and reaction of the end-user, to investigate the future shocks between 2020–2050, considering a new price shock, in the Iranian energy market for the first time. The research findings have shown that energy price liberalization leads to the energy intensity improvement, however, the end-user (shocking) reactions should be investigated to implement a more sustainable policy that eases the new energy price rises.

Keywords

• energy price liberalization
• electricity
• energy intensity
• electricity industry
• GDP
• high-dimensional data analysis