The Residential Demand for Electricity in South Korea

We study the residential sector electricity demand in South Korea based on aggregate monthly time series data from 2003 to 2013. We show that, on aggregate, households respond to the previous month average electricity price by encompassing tests, which can be explained by the households' cognitive cost of obtaining the price information for current billing cycle as Ito (2014) implied. Methodology: Based on a linear double-logarithmic specification, the estimated price and income elasticities are around -0.2720 and unity, respectively. Findings: Temperature and different types of days also affect the electricity demand. After controlling the Underlying Energy Demand Trend (UEDT) by a Structure Time Series Model (STSM), the substitution elasticities become insignificant, and the UEDT shows a steady deceasing usage trend.Recommendations: The study has important policy implications for policy making authorities.