Household Energy Demand and Its Determinants in Urban Ethiopia

ABSTRACT This study looks into households' energy demand and its determinants in Nakamte town. The main objective of the study is to analyze household demand for the main energy sources (fuel-wood, charcoal, kerosene and electricity), and identify factors influencing demand for the energy sources. The study used household-level survey data collected from 120 sample households in Nakamte town. Descriptive analysis of the data shows predominance of traditional energy sources in household energy mix which has environmental impacts such as deforestation, soil erosion and declining agricultural productivity, and loss in the natural habitat for the wildlife. We used a Linear Approximated Almost Ideal Demand System model (LA/AIDS) to estimate household energy demand system. The result shows that prices of energy sources significantly influence the energy expenditure shares of all energy sources. Demand for all energy sources are price elastic and all energy sources are substitutes. No energy source is an inferior good. Policy interventions need to focus on the estimated elasticities and household characteristics that significantly influence household energy demand.