Decomposition analysis on factors affecting electricity substitution in Guangdong province, China

Abstract

Electricity substitution is an effective measure for reducing pollutant emissions and promoting the consumption of renewable energy. The current research lacks a quantitative analysis method for the factors affecting regional electricity substitution. This article proposes a decomposition model of the factors affecting electricity substitution based on Logarithmic Mean Divisia Index method to expand the depth and breadth of electricity substitution. Results show that: (1) Macro‐level electricity substitution in Guangdong province develops steadily, with 1694.93 × 108 kWh of total electricity substitution quantity during the period 2006–2020. The electricity substitution quantity in production sector accounts for 83.92% of the total, which is much larger than that in household sector. (2) Sustained improvement of labour productivity gives the largest contribution (3592.32 × 108 kWh) to the increase of electricity substitution in production sector during the period 2006–2020. Living standard effect has the largest contribution (452.21 × 108 kWh) to the increase of electricity substitution in household sector during the period 2006–2020. Electrification level effect and population effect have significant impact on electricity substitution development, while industrial structure has little impact on electricity substitution. (3) Energy intensity effect and energy consumption growth effect negatively influence electricity substitution in Guangdong province. The decline of energy intensity in the production sector has driven the decrease of electricity substitution quantity, contributing −2540.36 × 108 kWh to electricity substitution during the period 2006–2020. Policy implications like continuously promoting breakthroughs in electricity substitution technologies, improvement of electrification rate in the sectors with potential for substitution, and improvement the price mechanism for fossil fuels and electricity can promote the deepening development of electricity substitution and the realisation of the carbon neutrality goal.