Resource information
Albania is among the most vulnerable
countries to external energy shocks and climatic conditions,
because of its high dependency on hydropower for
electricity. Given highly volatile international energy
prices and expected global warming, it is becoming
increasingly important to manage the demand for electricity.
However, the country has long been faced with a significant
problem of electricity metering. About one-third of total
energy is lost for technical and nontechnical reasons. This
paper estimates the residential demand function by applying
a two-stage system equation method for an endogenous
censored variable, because the lack of metering makes the
electricity consumption partially observable for the
econometrician. It is found that metering is important to
curb non-essential electricity use by households. The
electricity demand could also be reduced by raising the
first block rate and lowering the second block rate and the
threshold between the two blocks. In addition, weather
conditions and home appliance ownership would affect the
demand for electricity. But the latter looks more
influential than the former.
