Abstract for: A system dynamics approach to exploring the relationship between income distribution and residential electricity consumption
The economic health and development of modern economies are dependent on reliable electricity supply, which in turn is enabled by adequate energy planning and infrastructure investment. Adequate electricity planning can only be achieved through consideration of electricity demand drivers. Residential electricity demand, coupled to household income, is a significant contributor to electricity demand. This work reports on a system dynamics study of household income dynamics, including causality with respect to residential electricity demand. Household income dynamics is of particular relevance and importance to South Africa because of the country’s relatively high Gini coefficient and progressive redistributive policy measures. The flexibility and feedback dynamics offered by system dynamics provides an insightful alternative to conventional statistical-empirical approaches for exploring such relationships. The system dynamics model proves a strong correlation between income distribution and residential electricity consumption. Based on a GDP growth rate of 2% per annum, simulation results show that a transition in income distribution or Gini coefficient from 0.67 in year 2012 to 0.5 and 0.4 by year 2035 would result in additional increases in residential electricity demand of 3.1% and 4.7% respectively above the baseline demand growth caused by GDP growth. This dynamic is an important consideration for energy planners.