Stationary or not? A deep-dive into per capita electricity consumption of Indian states

Energy policies across the globe are dependent on estimates of electricity demand. While the scope and aim of policies may differ, without realistic forecasts, neither legislation nor policies will prove effective. This paper specifically addresses the issue of stationarity of Per-capita Electricity Consumption (PCEC) across Indian states, laying the foundational ground for various modelling forecasts to build on. Estimating using both traditional and advanced structural and non-structural break unit root tests for a set of 31 states, we find that the stationarity of PCEC depends on the nature of the testing procedure, unless examined at a deeper level. We conclude that most traditional test results ultimately prove ineffectual for policy purposes because they lack answers to two central questions: (i) what does it really mean for policy to be “temporary” or “permanent” in effect, at the national or sub-national level? (ii) In sync with the last question, have energy policies in India had a real impact? This paper answers these questions in depth, augmenting the existing application of unit root tests while using non-hierarchical clustering methods as a check of robustness. We conclude that energy policies in all the Indian states have had a lasting effect.