Analysis of the determinants of residential electricity consumption in Tanzania: an econometric approach

This study attempted to analyze the determinants of residential electricity consumption in Tanzania for the period 1970 to 2010. The study applied Cointegration approach whereby the long run and the short run linear models were estimated. The level of income, price of substitute energies and population were found to be the main determinants of residential electricity consumption level in Tanzania. However, the electricity consumption is not much responsive to the change in income as the income elasticity is less than unit (<1). The most important variable as in the analysis of any demand, price of electricity, and temperature were found to be insignificant. Furthermore, the study revealed that the substitution effect among the energy sources (electricity, kerosene and charcoal) is not mainly caused by their price differential but rather by the limitations in electricity power. The study recommends that the power industry in Tanzania (TANESCO) should strongly focus on increasing the power generation capacity. This can be done by encouraging new investments in the electricity sector and by using alternative energy sources for generating electricity power such us natural gas, coal, wind and solar. Moreover, other studies which will employ other types of data such as cross-sectional and panel data to analyze residential electricity consumption are encouraged. This is because time series data in developing countries including Tanzania are subjected to structural breaks which lead to unreliable results.