Determinants Beyond Prices in Energy Source Substitution
Authors: Soetan, O.S., Odesola, I.F. And Abu, R.
DOI Info: http://doi.org/10.5281/zenodo.12599456
ABSTRACT
The goal of the present study was to analyze how market demand determinants especially the income of consumers versus prices of energy sources influence the energy source substitution process. The Autoregressive Distributed Lag (ARDL) technique was employed to assess the cointegration among consumption of natural gas, crude oil, solar energy, nuclear energy, coal, and wind energy, alongside their prices, alternative prices, per capita income, and energy intensity. The analysis used annual data from 1977-2019. Additionally, a poll of 217 random respondents examined current and preferred energy choices and the demand determinants influencing these choices. The ARDL results revealed complementary and substitution relationships between energy sources. While crude oil consumption was mostly unaffected by its explanatory variables, the consumption of natural gas, solar energy, and nuclear energy was significantly influenced by income, with income coefficients exceeding those of prices. Poll results indicated a preference order of solar energy, wind energy, natural gas, crude oil, nuclear energy, and coal for electricity generation. Higher-income consumers prioritized the convenience of lower prices, while lower-income consumers prioritized income. Among respondents, 40.9% cited lack of income as the main barrier to adopting cleaner energy sources, while 40.3% pointed to the prices of cleaner energy sources. Additionally, 23.2% chose the low cost of polluting energy sources as their reason. The study concluded that income, rather than price, is the most significant determinant in the shift to cleaner energy sources.
Affiliations: Department of Mechanical Engineering, University of Ibadan, Ibadan, Nigeria.
Keywords: Energy Source Substitution, Producer Economies, Clean Energy, Energy Source Prices, Consumers’ Income
Published date: 2024/06/30
