The Demand for Energy in Nepal

  • Rita Shrestha Bhaktapur Campus, Tribhuvan University, Bhaktapur


This study aims at estimating energy demand functions in the Nepalese context including the estimate of partial adjustment model and energy requirement. Specifically, the study is devoted to assessing, whether or not, there exists any economies of scale with respect to the demand for energy; whether the speed of adjustment between desired and actual levels of energy is slow or fast; and how much energy will be required in the next 10 years. The energy demand functions estimated in this study are strong where GDP coefficients are statistically significant. The GDP elasticity is less than one suggesting economies of scale. The study reveals that one percentage point increase in GDP leads on an average to about a 0.45 percent increase in energy demand. The estimated functions indicate that the demand for energy is also sensitive to population. The partial adjustment model estimated in this study indicates that the speed of adjustment between desired and actual energy balance is much slower. The results are quite surprising as the adjustment is quite far from immediate. Based on the estimated equations, the forecast of energy requirement has also been made till 2009/10.