*The Dynamic of Residential Energy Demand Function: Evidence from Natural Gas DOI: http://dx.doi.org/10.5772/intechopen.102451*

calculated results suggest that the elderly coefficient (ELDit) in the residential natural gas demand dynamic equation is significantly negative. That is, as the population ages, natural gas usage declines. The senior elasticity of per capita natural gas demand is estimated to be 0.6. This appears counterintuitive, given that older people are more sensitive to temperature and consume more natural gas to suit their comfort demands, notably for space and water heating, and they spend more time at home [22]. However, possible explanations for the negative effect of ELD on residential natural gas consumption could be related to the fact that either old people in OECD countries have an economic behavior, or that OECD old people do not spend much time inside the house and prefer to do more activities outside. It could also be due to the fact that older folks prefer electric equipment to gas appliances. Another explanation is that, with the recent ubiquity of electrified houses, a major share of appliances used for daily life at home in OECD countries may be electric appliances. The fact that the estimation revealed a negative influence on residential natural gas demand backs up the previous claims.

Second, in the residential natural gas demand dynamic equation, the urbanization rate (URBit) coefficient is notably positive. The elasticity of per capita natural gas demand in relation to urbanization rate, in other words, is expected to be +1.1. The result appears to be consistent with previous research, as natural gas is widely used in cities and less so in rural areas, where coal and wood are commonly used. Coal, wood, and other conventional fuels are being replaced by cleaner energy sources, particularly natural gas and electricity, as the population of rural areas migrates to cities and towns.

Third, when it comes to the influence of population density (DENit), the study reveals that the DENit coefficient is strongly negative. A decrease in per capita natural gas usage occurs when population density rises. The population density elasticity of per capita natural gas demand is estimated to be around 0.16. Residential natural gas consumption per capita is lower in countries with dense populations. A probable explanation for the finding is that the majority of OECD countries apply energy saving processes and choose to use central heating systems, which provide warm space and water to the entire interior of the building.

Almost all of the control variable estimated coefficients are statistically significant, have the predicted sign, and have appropriate magnitudes. Gas prices (GPit) have a negative impact on per capita natural gas demand, whereas population (POPit), heating degree days (HDDit), and cooling degree days (CDDit) have positive impacts on residential natural gas consumption, indicating that natural gas demand is more sensitive to hot than cold weather.

When it comes to assessing the dynamic model, the AR1 and AR2 tests show that there is no significant autocorrelation in the model, which is a need for the instruments' validity. Furthermore, the Hansen test demonstrates that the null hypothesis, namely, that the over-identifying constraints are valid, is not rejected.
