Industrial Electricity Consumption in the UK: past determinants and future prospects

The determinants of industrial electricity demand are examined and it is found that more than 40% of demand growth in the period 1959¿1980 was caused by factors either unrelated or only indirectly related to growth in industrial output. Factors such as adjustments in industrial structure, technical change and the decline in self-generation of electricity were all important contributors to demand growth. Together with the methodological problems of using price as an explanatory variable, this suggests that those econometric approaches to demand forecasting for industrial electricity which rely solely on projections of industrial output and price are seriously defective. Output level and price are important in future demand, but current methods are not appropriate to capture their effect and more detailed sectoral work is required, which should take into account structural and technical change and developments in self-generation.