Price elasticity of demand for natural gas – Stated preference research
Evoenergy commissioned the CIE to forecast the number of disconnections from its gas network and reductions in gas usage per customer over the next 20 years and to estimate how these forecasts would be impacted by a range of gas and electricity price scenarios. Most of Evoenergy's network lies in the Australian Capital Territory (ACT), where the Government has committed to phasing out natural gas by 2045 and gas demand has started to decline.
The CIE used a choice modelling (or discrete choice experiment) survey of 1885 of Evoenergy’s residential customers to quantify the relationship between appliance replacement decisions and energy prices/incentives. The survey found that, over the range of prices and incentives tested, most households will wait until their appliances break before replacing them and, once they do break, most households will switch to electric appliances. However, the extent depends on prices and incentives. The households likely to disconnect from the gas network soonest include owner-occupiers, middle-income households, and/or those with decision makers aged over 60 years.
Since only around one third of households in the survey indicated price and rebate levels tested in the survey would influence their appliance replacement behaviour, the estimated long-term retail price elasticity of demand for gas connections is relatively low at -0.022 for the response to 2031, -0.045 for the response to 2036, and -0.061 for the response to 2041. An elasticity of -0.061 means that connections decrease by 0.61 per cent relative to the base case in response to a 10 per cent increase in price.
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