Household differentiation and residential electricity demand in Korea

Abstract This paper investigates the impact of rapid demographic changes in Korea on residential electricity use. Demographic changes in Korea are characterized as i) household differentiation (increasing number of nuclear (one- or two-person) households despite the stagnant population growth) and ii) unprecedentedly fast-paced population ageing. Per capita electricity demand is estimated using a dynamic panel model with the system GMM. Results show that household differentiation has increased per capita electricity use in both short- and long-run; the ageing population has the negative impact on per capita electricity consumption. The impact of household differentiation, which is projected to be accelerated with the persistent low fertility in Korea, is substantial. Nuclear households use more electricity per person, but pay less electricity bill since Korea has the progressive electric billing system. Stakeholders and industry analysts should consider household differentiation to prepare the long-run electricity provision policy as well as the proper billing system. Lessons from the study have wider policy implications in other developed countries with the similar demographic changes.