LAPSE:2019.0358
Published Article
LAPSE:2019.0358
Modeling and Forecasting Electricity Demand in Azerbaijan Using Cointegration Techniques
Fakhri J. Hasanov, Lester C. Hunt, Ceyhun I. Mikayilov
February 27, 2019
Policymakers in developing and transitional economies require sound models to: (i) understand the drivers of rapidly growing energy consumption and (ii) produce forecasts of future energy demand. This paper attempts to model electricity demand in Azerbaijan and provide future forecast scenarios—as far as we are aware this is the first such attempt for Azerbaijan using a comprehensive modelling framework. Electricity consumption increased and decreased considerably in Azerbaijan from 1995 to 2013 (the period used for the empirical analysis)—it increased on average by about 4% per annum from 1995 to 2006 but decreased by about 4½% per annum from 2006 to 2010 and increased thereafter. It is therefore vital that Azerbaijani planners and policymakers understand what drives electricity demand and be able to forecast how it will grow in order to plan for future power production. However, modeling electricity demand for such a country has many challenges. Azerbaijan is rich in energy resources, consequently GDP is heavily influenced by oil prices; hence, real non-oil GDP is employed as the activity driver in this research (unlike almost all previous aggregate energy demand studies). Moreover, electricity prices are administered rather than market driven. Therefore, different cointegration and error correction techniques are employed to estimate a number of per capita electricity demand models for Azerbaijan, which are used to produce forecast scenarios for up to 2025. The resulting estimated models (in terms of coefficients, etc.) and forecasts of electricity demand for Azerbaijan in 2025 prove to be very similar; with the Business as Usual forecast ranging from about of 19½ to 21 TWh.
Keywords
Azerbaijan electricity demand, cointegration and error correction models, forecast scenarios, time series analysis
Suggested Citation
Hasanov FJ, Hunt LC, Mikayilov CI. Modeling and Forecasting Electricity Demand in Azerbaijan Using Cointegration Techniques. (2019). LAPSE:2019.0358
Author Affiliations
Hasanov FJ: King Abdullah Petroleum Studies and Research Center (KAPSARC), P.O. Box 88550, Riyadh 11672, Saudi Arabia; Institute of Control Systems, Institute of Cybernetics, B. Vahabzade Street 9, Baku AZ1141, Azerbaijan
Hunt LC: King Abdullah Petroleum Studies and Research Center (KAPSARC), P.O. Box 88550, Riyadh 11672, Saudi Arabia; Surrey Energy Economics Centre (SEEC), University of Surrey, Guildford, Surrey GU2 7XH, UK
Mikayilov CI: Department of Economics and Administrative Sciences, Qafqaz University, H. Aliyev Street 120, Khirdalan AZ0101, Azerbaijan; Institute for Scientific Research on Economic Reforms, 88a, Hasan Bey Zardabi Avenue, Baku AZ1011, Azerbaijan
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Journal Name
Energies
Volume
9
Issue
12
Article Number
E1045
Year
2016
Publication Date
2016-12-13
Published Version
ISSN
1996-1073
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Original Submission
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PII: en9121045, Publication Type: Journal Article
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LAPSE:2019.0358
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doi:10.3390/en9121045
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Feb 27, 2019
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Calvin Tsay
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