Elasticity of Demand for Electricity in Kenya From Time Series Data

Abstract

The Kenya Vision 2030 identifies electricity as a development enabler. Electricity plays a key role in development. It facilitates technological advancements therefore enhancing gains in productivity. Generally, electricity improves social advancement and attains faster economic growth. However the demand for electricity exceeds the supply. The study investigates the determinants of demand for electricity and their current elasticities using secondary annual time series data from 1971 to 2012. The study employed OLS and the Error Correction Model in data analysis. The results indicated that in the short run industrial production and kerosene prices were key factors that determine demand for electricity. The government therefore should strive to improve efficiency through modernizing industrial technology. The government should also increase production of electricity to match the industrial growth.