Document Type : Research Paper

Authors

• Hamid Amadeh ¹
• Hossein Tavakolian ²
• mehdi hedayati nia ³

¹ Associate Professor, Faculty of Economics, Allameh Tabataba'i University

² Associate Professor, Allameh Tabataba'i University

³ Graduated in Energy Economics, Allameh Tabataba'i University

Abstract

The increasing demand of fossil fuels alongside its environmental pollution necessitates the optimal consumption of the fuels. In cold seasons, natural gas consumption increases and power plants of the country need to substitute their consumed fuel in order to supply electricity. This paper evaluated the substitution between consumable fuels in electricity production in six selected regional electricity companies during the years 1389-1386. Cost share equations of conventional fuels in electricity generation were estimated using the seemingly unrelated regression equations (SURE) estimator. Using the results of the estimation, equations of the own-and cross-price elasticities of the substitution of different fuels were calculated. According to the results of calculations, all the own price elasticities were negative and cross price elasticities were positive. The substitute elasticity between natural gas and gasoil was 1.56 and between natural gas and mazut was 1.3. Also, using the calculated elasticities, the substitution of fuels was applied with the aim of reducing CO₂ emissions. The application results showed that the substitution of mazut with natural gas would reduce CO₂ emissions, but the substitution of gasoil with natural gas would increase CO₂ emissions.

Keywords

• Regional electricity company
• Seemingly Unrelated Regressions Equations
• Elasticity of substitution
• Fuel substitution