Efficiency of Power Consumption and Estimation of Transmission Probabilities among High and Low Power Consumption Regimes in Iranian Agricultural Sector

Today, energy supply is one of the most important issues in development process of all countries in the world. There is a close relationship between economic growth and development and energy consumption. Agriculture plays a critical role in the national economy and food production and energy has always been essential for the production of food and agricultural products. In agriculture, various fuels are used as a source of energy, including gasoline, kerosene, natural gas and electricity. Over time, the electrical equipment used in the agricultural sector has increased, and as a result, the need to use electrical energy has also increased. Electricity is one of the main inputs in the agricultural sector, so that, more than 16 percent of electricity production in Iran, allocated to this sector for more than 20 percent of the provinces in Iran, electricity power consumption in the agricultural sector is more than that of in the industrial sector. Energy intensity is one of the key terms in the literature on energy efficiency. The energy intensity of agriculture is defined as the ratio between the final energy consumption of the sector and the value added of agricultural sector. Energy efficiency refers to the activity or product that can be produced with a given amount of energy. There is a widespread assumptions in energy statistics and econometrics that energy intensity and energy efficiency are equivalent measures of energy performance of economies.
Because of the importance of efficiency in production inputs, the main objective of this study is to evaluate the efficiency of electricity consumption in the agricultural sector of Iran. For this purpose, the state of high and low efficiency of electricity consumption in the agricultural sector was detected by using Markov regime switching model during the period 1342 to 1393. The Markov switching model proposed by Hamilton (1989) is one of the most popular nonlinear time series models in the econometrics literature. A Markov switching model is constructed by combining two or more dynamic models via a Markovian switching mechanism. A Markov regime switching Model is the generalization of the simple dummy variables approach that allows regimes or states to occur several periods over time. In each period t, the state is denoted by st. There can be m possible states: st = 1,... , m. the states in this models may be recessions and expansions, high and low volatility, depressive and non-depressive or high and low efficiency states, etc. The time of transition between states and the duration in a particular state are both random and the transitions follow a Markov process. In the nonlinear models, any of the parameters (such as beta estimates, sigma, and AR components) may be different for each state. The Markov switching model and its variants discussed in the preceding sections are only suitable for stationary data. Because the order of integration of a time series is of great importance for the analysis, therefore, several statistical tests have been developed for investigating it. In this paper, we use ADF and PP unit root test for investigation of integration order of variables such as energy efficiency, growth rate of per capita GDP and consumer price index.
First, the results clearly suggested that the unit root null hypothesis for the selected variables can be rejected. The estimation of Markov regime switching model showed that the duration of low efficiency regime in the agricultural sector is more stable than the high efficiency regime. The average duration of the low efficiency regime is 2.5 months and the average duration of the high efficiency regime is 1.7months. The results also showed that the general level of prices and per capita production has negative and positive effect on the efficiency of electricity consumption in the agricultural sector, respectively.
The trend of energy consumption and efficiency of electricity in agricultural sector and at the national level shows that the average energy consumption over the past 51 years has increased and at the same time electricity efficiency (both in agricultural sector and in total economy) has declined over the long term. The trend of energy efficiency indicators shows that agricultural producers are not efficient in the process of production. According to the results of the study, systematic planning for the optimal use of inputs is suggested to improve energy efficiency in agricultural sector. In order to increase the efficiency of energy usage, especially electricity usage in the agricultural sector, following ways recommended: restructuring of the production and use of newer and more efficient technologies; financial support and providing banking facilities to optimize consumption and energy supply projects.