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DRAFT Household Behavior in Managing Electrical Consumption in Alor Setar

Introduction Overview of the Study This research will focus on electricity consumption among household. This investigation will measure the usage of electricity per month in Alor Setar. This study also will observe more on factor that influence household behavior in managing electrical consumption as the electrical energy is play an important role in human life. Problem Statement The consumption of electricity in Malaysia rises rapidly every year, with an average of 2,533 GWh per year. The electricity consumption, for instance, in 1971 was 3,464 GWh and 94,278 GWh in 2008. By 2020, Malaysia’s electricity consumption is expected to increase by about 30% from its present value to 124,677 GWh. Moreover, there is a strong relationship between Malaysia’s GDP (Gross Domestic Product) and Malaysia’s electricity consumption. To put it succinctly: high GDP = high economic growth = high production = high energy.

Malaysia's electricity consumption (1971-2008)

From the above graph, we can state that the total consumption in Malaysia has increase from 1971 until 2008. We can conclude that the demand for domestic electricity rising heavily every year due to the increasing in the usage by household as a whole.

Research Question This investigation is to measure the factor that influences electricity consumption among household. There are several factors such income, resident size, household size, prices of energy, age, life style and level of education. By this research, it will determine most significant influence toward the electricity consumption among household in Alor Setar.

Literature Review I. Income Household’s income is most important determinant of electricity consumption. Increase in income and its impact on living standards is the main driving force of electricity consumption (Udo N. Ekpo, Chuku A. Chuku and Ekpeno L. Effiong, 2011) Electricity purchases depend on liberal/environmentalist ideology, characteristics of the household such as income (Dora L. Costa and Matthew E. Kahn,2010) Income is another important variable affecting demand for electricity at household HH demand for electricity (Naeem Ur Rehman Khattak, Muhammad Tariq and Jangraiz Khan, 2010) Since electricity is a normal good (service), higher disposable income is expected to increase consumption through greater economic activity and purchases of electricity-using appliances in the short- and long-run (Pernille Holtedahl, Frederick L. Joutz, 2004) Real gross domestic product (Y) was used as a proxy of income. It was used to measure the elasticity of electricity consumption towards the changes in income. (Hussain Ali Bekhet and Nor Salwati bt Othman,2011)

II.

Price of Electricity An increase of 1% in the real unit price of electricity would reduce per customer commercial and industrial electricity consumption by 0.89% (Richard J Cebula, Nate Herder, 2010) Increasing in the price index of electricity will (ceteris paribus) result approximately a 0.3-0.4 percent decline in household consumption of electricity (Massimo Filippini and Shonali Pachauri, 2002) Price increases tend to reduce demand by the price elasticity of energy may be small for some segments of the population. Large price increases tend to reduce demand at least temporarily, while consumers adapt more easily to small price increases (W. Fred Van Raaij And Theo M.M. Verhallen, 1983) Price of electricity as selected variables deemed most relevant to show the relationship between each of these independent variables and the electricity consumption (Zaid Mohamed and Pat Bodger, 2005) When electricity price increases the amount of electricity consumption is expected to be reduced (Syazwani Aman, Hew Wooi Ping, and Marizan Mubin, 2011) As with the household’s income, electricity price is another important factor affecting electricity income (Udo N. Ekpo, Chuku A. Chuku and Ekpeno L. Effiong, 2011)

III.

Education The general expectation that education and conservation would be positively associated (Richard Semenik, Russell Belk and John Painter, 1982) Education is used in sense of awareness. It is assumed that demand for electricity at household with highest level of education save more electricity (Naeem Ur Rehman Khattak, Muhammad Tariq and Jangraiz Khan, 2010) Education and age significantly influence the electricity consumption of urban. (Anay Vete,n.d)

IV.

Household Size Household size is highly significant and has expected positive sign with residential demand for electricity. This show electricity demand is highly elastic to household size in both short run and long run. (Muhammad Salman Tariq, Muhammad Nasir and Ankasha Arif, 2008) According to the regression estimates, one consumption unit increase in family size increases electricity bill by HUF 3,500 (EUR 13 at the average level of expenditure)( Andrea Dúll And Béla Janky, 2011) It is expected that household size and floor area would have positive coefficients as larger families would consume more electricity (Kate Louw and et.,2008)