Industrial electricity demand for Turkey: A structural time series analysis

This research investigates the relationship between Turkish industrial electricity consumption, industrial value added and electricity prices in order to forecast future Turkish industrial electricity demand. To achieve this, an industrial electricity demand function for Turkey is estimated by applying the structural time series technique to annual data over the period 1960 to 2008. In addition to identifying the size and significance of the price and industrial value added (output) elasticities, this technique also uncovers the electricity Underlying Energy Demand Trend (UEDT) for the Turkish industrial sector and is, as far as is known, the first attempt to do this. The results suggest that output and real electricity prices and a UEDT all have an important role to play in driving Turkish industrial electricity demand. Consequently, they should all be incorporated when modelling Turkish industrial electricity demand and the estimated UEDT should arguably be considered in future energy policy decisions concerning the Turkish electricity industry. The output and price elasticities are estimated to be 0.15 and - 0.16 respectively, with an increasing (but at a decreasing rate) UEDT and based on the estimated equation, and different forecast assumptions, it is predicted that Turkish industrial electricity demand will be somewhere between 97 and 148 TWh by 2020.