The economics of home energy usage: Insights from urban economy.

ABSTRACT

Recent regional investigations in the United States have revealed a thought-provoking perspective household electricity consumption may act as an inferior commodity, displaying a negative correlation with wealth. This finding challenges the outcomes of various other econometric analyses and underscores the importance of scrutinizing power consumption patterns across different regional service areas. While it is commonly believed that home electricity usage decreases as income rises, this may not always hold true universally. This study focuses on power usage in Seattle, Washington households, a prominent urban economy in the Pacific Northwest. Employing dynamic error correction modeling techniques, the research demonstrates statistically significant fluctuations in domestic power usage attributed to variations in actual value, actual revenue, and cold weather. In the immediate future, energy for homes in this urban economy resembles any other commodity. However, investing in electricity for homes in Seattle may not be advisable in the long run. Home power usage in Seattle declines with each percentage point increase in actual per capita income over 1.2 %. This finding highlights the need for careful consideration and strategic planning in energy management policies for urban economies like Seattle.