Determinants of Residential Demand for Electricity in Tanzania (1974-2009)

Diu, James B. (2011) Determinants of Residential Demand for Electricity in Tanzania (1974-2009). Masters thesis, OPEN UNIVERSITY OF TANZANIA.

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Abstract

This thesis attempts to review some crucial aspects in determination of electricity demand for residential customers in the country. In this connection, it estimates the price elasticity of residential demand for electricity in Tanzania. It does so by using cointegration and error correction procedures, with key variables identified as the domestic electricity tariff, per capita income, size of the population, price of kerosene, and overall energy utilization from 1974 till 2009.Major findings of the thesis are that electricity demand for residential customers is inelastic in both short run and long run. In addition, the short run elasticity of residential demand for electricity is higher than the long run electricity contrary to the empirical literature. The thesis concludes that the investment requirements to fulfill the projected demand for the next 15 years towards our national development vision 2025 are enormous. The high projected demand emanates from the rapidly increasing demand and the need to increase availability of electricity service to the population. In addition, tariff reforms are necessary to support competitive power market development and to strengthen the power utilities’ financial position.

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