Towards the smart grids: Impact of Commercial and Industrial Electricity Price Adjustment on Output and Electricity Consumption

Abstract:
Electricity is a crucial factor input for production. To reduce the cost of electricity for enterprises and relieve the real economy, China released the policy to reduce electricity tariffs twice for the general commercial and industrial in 2018 and 2019. The electricity price always plays a significant role in the development of smart grids. Based on the actual electricity consumption data of 209 general industrial and commercial customers in Zhejiang Province, this paper constructs an empirical model to investigate the variations in enterprise output and electricity consumption after the electricity price adjustment. The results indicate that for every 1% decrease in electricity prices, output increases by 0.83%, and electricity consumption increases by 1.15%. The decline of electricity price has a significant positive impact on the economy, and the electricity consumption of enterprises exhibit both the income and substitution effects.