-

The energy carriers (e.g. electricity) have a prominent role in the sustainable economic development. Among energy carriers, electricity has an essential role because of not having substitute in many cases as well as its ongoing expansion in the different stages of economic development. This research will investigate the functional relationship of electricity demand by using the co-integration techniques especially ARDL method and Error Correction Mechanism (ECM). The quality of electricity supply (by using frequency shortage data) is included in the model. The frequency shortage data is used since it has been considered as an index for low quality of supply in the industrial sector. The results indicate that the long-run industrial electricity demand can not be considered as a function of electricity price. In addition, the estimated price and income elasticities in the short- and long-run prove that electricity is an inelastic input. Cross-price elasticities indicate that electricity and natural gas are substitutes in the short-run. Further more, the quality of electricity supply in the model is a significant variable which indicates its impact on the level of industrial electricity demand in Iran.
JEL Classification: C22, C52, Q41