Evaluation of increasing block pricing for households' natural gas: A case study of Beijing, China

In order to promote reasonable resource utilization and improve social equity, all cities with gas supply in China has implemented increasing block pricing (IBP) policy for residential natural gas from Jan. 2016. This paper examines the IBP structure of residential natural gas from the perspective of demand analysis. Based on Expenditure-Income Ratio (EIR) method and Extended Linear Expenditure System (ELES), a new EIR-ELES model is proposed to estimate natural gas price affordability of different kinds of residential users by considering the effect of electricity substitute on household natural gas consumption. Taking Beijing as an example, an empirical research is carried out in this paper. The results show that average price elasticity of residential natural gas demand is -0.4621 in 2016, inelastic; residential natural gas average price affordability is between 4.17 and 7.48 CNY/m3 in 2016, which is much higher than the prices in three blocks, but basic volume of demand for residential users with different income levels are much lower than the volume in the first block. Based on these results, future directions and actions for the design and improvement of residential natural gas IBP system are suggested. (C) 2018 Elsevier Ltd. All rights reserved.