Electricity subsidy reform in Indonesia: Demand-side effects on electricity use

Paul Burke, Sandra Kurniawati

    Research output: Contribution to journalArticle

    Abstract

    Indonesia's budget has for years been burdened by large subsidies for electricity consumption. A series of recent reforms has delivered a substantial reduction in these subsidies. In this paper we estimate demand-side effects of these reforms on electricity use. Our analysis utilizes a three-dimensional dataset covering six consumer groups, 16 regions, and 1992-2015. We control for various fixed effects, and use an instrumental variable approach. Our estimates suggest that subsidy reductions since 2013 had induced savings in annual electricity use of around 7% relative to the no-reform counterfactual as of 2015. The phase-out of remaining subsidies has the potential to generate further improvements in the efficiency of electricity use, while freeing up resources for other priorities such as infrastructure spending.
    Original languageEnglish
    Pages (from-to)410-421pp
    JournalEnergy Policy
    Volume116
    DOIs
    Publication statusPublished - 2018

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