Science, Technologies, Innovations №1(17) 2021, 34-42 p

 PDF

http://doi.org/10.35668/2520-6524-2021-1-03

Mammadov Fariz — Advisor to Rector for Scientific and Research Issues, Azerbaijan Technical University, Baku, Azerbaijan; +994503112796; fariz.mammadov@aztu.edu.az

EVALUATION OF THE ECONOMIC IMPACT OF ELECTRICITY PRICES CHANGE (AZERBAIJAN CASE)

Abstract. This paper has examined the impact of electricity tariff changes to other economic sectors, as well as to potential changes of price levels in the overall economy. In this regard, the authors have applied the Inter-Industry Balance Model and its modification, i.e. Equilibrium Price Multiplier Model. The authors have also empirically built the inter-industry balance and equilibrium price models for the case of Azerbaijan’s economy, and conducted analysis and assessments for this case. The inter-industry balance tables of production and distribution of products and services, officially published by the State Statistical Committee of the Republic of Azerbaijan, were taken as the primary database for this study. It should be noted that the inter-industry balance model for Azerbaijan was built based on 96 sectors of the economy. The model was used to assess the economic impact of electricity price changes in the national economy. Finally, simulations relevant to 10, 20 and 30 percent increase of electricity prices were conducted and potential impacts to Azerbaijan’s economy were assessed. The obtained results were analyzed and summarized.

Keywords: electricity prices (tariff), price change, equilibrium price model, input-output model, impact analysis, economic policy.

REFERENCES

  1. Bijnens, G., Konings, J., & Vanormelingen, S. (2018). The impact of electricity prices on jobs and investment in the Belgian manufacturing industry. Vives Policy Paper. March, 20 p.
  2. Breisinger, C., Thomas, M., & Thurlow, J. (2015). Social Accounting Matrices and Multiplier Analysis. An Introduction with Exercises. International Food Policy Research Institute. 43 p.
  3. Gonese, D., Hompashe, D., & Sibanda, K. (2015). The impact of electricity prices on sectoral output in South Africa from 1994 to 2015. African Journal of Economic and Management Studies. Vol. 10. No. 2, P. 198–211. https://doi.org/10.1108/ajems­12­2017­0305
  4. Griffin, J. M. (1974). The Effects of Higher Prices on Electricity Consumption. The Bell Journal of Economics and Management Science. Vol. 5, No. 2. P. 515–539.
  5. Hasanli, Y., Hasanov, F., & Mansimli, M. (2010). Equilibrium Prices Model for Sectors of Azerbaijan Economy Based on Input­Output Tables.  EcoMod2010 International Conference on Economic Modeling. Istanbul. July 7–10. https://doi.org/10.2139/ssrn.1784326
  6. Hirth, L. What Caused the Drop in European Electricity Prices? A Factor Decomposition Analysis. 144. The Energy Journal.
  7. Kilian, L. (2008). The Economic effects of energy prices shocks. Journal of Economic Literature. 46:4. 871–909. https://doi.org/10.1257/jel.46.4.871
  8. Kim, K. Hypothetical Integration in a Social Accounting Matrix and Fixed­Price Multiplier Analysis. Levy Economics Institute Working Paper. No. 552.
  9. Kwon, S., Cho, S. H., Roberts, R. K., Kim, T., & Yu, T. E. (2015). Effects of changes in electricity price on electricity demand and resulting effects on manufacturing output. Selected Paper prepared for presentation at the 2015 Southern Agricultural Economics Association’s Annual Meeting. Atlanta, Georgia. January 31–Feburary 3. https://doi.org/10.1016/j.energy.2016.02.027
  10. Lange, E. (2008). The impact of increased electricity prices on consumer demand. A research project submitted to the Gordon Institute of Business Science, University of Pretoria, in partial fulfilment of the requirements for the degree of Master of Business Administration. Date: 13. November, 75 p.
  11. Mbanda, V., & Bonga, L. B. (2018). CGE Microsimulation Analysis of Electricity Tariff Increases: The Case of South Africa. MPRA Paper. No. 90120.
  12. Nguyen, Kh. Q. (2008). Impacts of a rise in electricity tariff on prices of other products in Vietnam. Energy Policy. 36(8). 3145–3149. https://doi.org/ 10.1016/j.enpol.2008.04.013
  13. Peters, S. The Impact of Electricity Price Increases on Municipalities. Chapter 10.
  14. Pyatt, G. F., & Round, J. I. (1979). Accounting and Fixed Price Multipliers in a Social Accounting Matrix Framework. The Economic Journal. 89. 850–873. https://doi.org/10.2307/2231503
  15. Round, J. Social Accounting Matrices and SAM­based Multiplier Analysis. Chapter 14, 22 p.
  16. System of National Accounts (2008). European Union, International Monetary Fund, Organization for Economic Cooperation and Development, United Nations and World Bank.
  17. The impact of electricity price increases on the competitiveness of selected mining sector and smelting value chains in South Africa (2014). Global Green Growth Institute. August, 72 p.
  18. Valiyev, V., Mammadov, F., & Mehdiyev, M. (2019). Assessment Of The Impact Of Electricity Tariff Change For Azerbaijan. Energy Resources of the Caspian and Central Asia: Regional and Global Outlook, 4th IAEE Eurasian Conference. October 17–19.
  19. Valiyev, V., Mehdiyev, M., Suleymanov, A., Alakbarov, E., Musayev, R., Nagoibaeva, E., & Zakharova, N. (2014). Principal Features of Building Social Accounts Matrix and Improving Statistical Database for Eco­countries. Chinese Business Review. October Vol. 13, No. 10, 611–623. https://doi.org/ 10.17265/1537­1506/2014.10.002
  20. Wassilly, L. (1979). Environmental Repercussions and the Economic Structure: An Input­Output Approach. Review of Economics and Statistics. 52 (3). 262–271.
  21. World Energy Outlook 2018. International Energy Agency.
  22. Zarandi, M. T. P., & Rahmani, T. (2018). The Effect of Increasing Electricity Price on the Price of Groundwater and Profitability of Agricultural Production. American Journal of Water Resources.  6 (1). 15–24. https://doi.org/10.12691/ajwr­6­1­3
  23. Suleymanov, A. S., & Rustamov, E. Sh. (2016). Otsenivaniye Mul’tiplikativnykh Effektov Kapital’nykh Vlozheniy Na Osnove Matritsy Sotsial’nykh Schetov [Estimation of the Multiplicative Effects of Capital Investments Based on the Matrix of Social Accounts]. Fundamental’nyye issledovaniya [Fundamental Research]. No. 9. ch. 2. St. 1. P. 192–197.
  24. The State Statistical Committee of the Republic of Azerbaijan. Retrieved from: www.stat.gov.az.
  25. Tariff (price) Council of Azerbaijan Republic. Retrieved from: www.tariffcouncil.gov.az.
  26. The Republic of Azerbaijan Ministry of Economy. Retrieved from: www.economy.gov.az.