Modeling the Seasonal Patterns of Coal and Electricity

Production across Chinese Provinces

Eric Girardin* M.J. Herrerias

Université de la Méditerranée,
Aix Marseille II, GREQAM

20 July 2011

Abstract

This paper provides evidence on the relevance of modeling adequately the seasonal
character of coal and electricity production across Chinese regions. Unlike other work, this
paper relaxes the assumption of deterministic seasonality, allowing for time and regional
variation in this economy. More specifically, we analyze and distinguish the type of
seasonality around the year that prevails in the case of coal and electricity production of
each individual Chinese province. We use unobserved-components models with monthly
data for a fifteen-year period up to 2010. Our results indicate that for the majority of the
provinces seasonality is stochastic in both types of energy considered. Besides, our findings
provide new evidence of a Lunar New-Year effect in February and Summer as well as
Winter effects in coal and electricity production. However, in terms of seasonal patterns
and their evolution over time, there are significant differences between the Northern
regions that produce coal and the Southern ones that generate electricity. In addition, we
find that such results are not substantially altered once we control our estimates for
temperature, income and energy prices. Besides for each type of energy, regional clusters
matter for the appropriate design of energy-development policy.

Key words: Seasonality, Unobserved Components, China, Energy

JEL Classification: Q43, Q47, Q50, O11, R11

Corresponding author: M.J. Herrerias, Université de la Méditerranée, Aix Marseille II,

GREQAM. Centre de la Vieille Charité 2, rue de la Charité 13236 Marseille cedex 02
(France). E-mail address: maria-jesus.herrerias@univmed.fr.

*
E. Girardin, Université de la Méditerranée, Aix Marseille II, GREQAM. Centre de la Vieille
Charité 2, rue de la Charité 13236 Marseille cedex 02 (France).
E-mail: eric.girardin@univmed.fr.
The authors gratefully acknowledge the financial support of European Union, project No.
218246. The usual disclaimer applies.
1. Introduction

Today, the Chinese economy is one of the new major players in

international markets and one of the countries that contributes most to

world GDP. The Asian locomotive, as many authors call China, however,

plays also an important and increasing role in the production and

consumption of energy resources to fuel economic activity, which of course

has implications not only for its domestic economy but also for

international markets. This paper argues that in order to disentangle the

complexity of the energy situation in a sub-continent like China, one needs

to account for three major dimensions. First the predominance of raw coal

and its processing to generate electricity; second, the major importance of

the regional dimension through transmission grids, due to the notable

distances between the producing and consuming regions; third, the wide

seasonal changes around the year in coal and electricity production, and the

time variation of such seasonal patterns. This latter aspect is important in

the energy-economics literature because a well-known stylized fact on

energy modeling is the underlying trend and seasonal behavior around the

year (Hunt et al., 2003). However, previous work have either ignored it or,

at best, used as a proxy a simple deterministic seasonal dummy and a time

trend with the risk of producing significant bias in the analysis. For this

reason, considering a flexible framework that allows for the stochastic

[2]
 character of both components provides robust evidence on the changes in

the seasonal patterns and their evolution over time (Hunt and Judge, 1996;

Rao, 2010). In this paper, we show the need to relax the assumption of

deterministic seasonality, allowing for time and regional variation, in order

to fully understand the seasonal character of coal and electricity production

of each Chinese region.

One of the characteristics of domestic energy resources in China is the

predominance of coal as the main source of energy in a direct or indirect

way, like when it is used to produce electricity. This domination has also

been reflected in international markets since the Chinese economy has

become the largest consumer and producer of coal in the world with 1537.4

and 1552.9 million tons oil equivalent respectively in 2009.1 These figures

are higher than in developed countries such as the United States and Japan,

or even some developing countries like India.2 Moreover, in terms of

electricity generation, China has reached the second position in the world

with 3725.1 terawatt-hours in 2009, behind only the United States.

However, coal and electricity production in the Chinese economy are

unevenly distributed across regions, the spatial dimension being the key

1 However, in terms of reserves USA continues to be the first country and China the second.
2
All the data in this section and the next comes from Statistical Review of World Energy in
2010 and China energy Databook in 2008.
[3]
 aspect to understand China’s energy development.3 Northern regions, like

Inner Mongolia and Shanxi, hold the majority of coal reserves, while the

generation of electricity is mainly located in the South and East of China, in

provinces like Guangdong, Jiangsu and Shandong. Nonetheless, there is a

large distance between inland producers and the most developed provinces

on the coast that require notable amounts of energy. The transportation of

energy among these regions is crucial to fuel development, but still presents

problems inherited from the planned system.

The issue of seasonality has been intensively investigated in other fields,

particularly for stock markets such as Kramer, (1994), Bouman and

Jacobson (2002) or more recently in Worthington (2010) and, in the case of

China, Girardin and Liu, (2005) for stochastic versus deterministic

seasonality. Moreover, evidence on seasonality is also found in industrial

production data (Frances and Kunst, 2007) or, outside economics, in fields

like biological conception (Rizzi and Dalla-Zuanna, 2007). However, in

energy-economics, evidence on seasonality is relatively scarce. Some work,

such as Clements and Madlener (1999) and Mitchell et al., (2000), examine

the nature of seasonality of energy demand in the case of the United

Kingdom and energy prices in the case of Australia respectively, assuming

deterministic seasonality. By contrast Hunt and Judge (1996) and Hunt et

3 See Wang (2007) also for the imbalance development of coal and electricity industries.
[4]
 al., (2003), in the case of the United Kingdom, relax this hypothesis by

investigating the stochastic character of energy demand in the structural

time series approach. Other work analyzing the trend and seasonal

components within the latter approach are Hunt and Ninomiya (2003) or

more recently Amarawickma and Hunt (2008), Dilaver and Hunt (2011) and

Sa’ad (2011). In the case of China, some research, such as Wang and Feng

(2005) and Asadooorian et al., (2008), through the application of panel data

techniques, examines the factors that cause energy consumption across

Chinese regions. However, none of this work investigates the seasonal

patterns and their evolution over time for energy.4 Lam et al., (2008) also do

not consider the issue of seasonality. Instead, these authors analyze the

causes of energy consumption in the case of Hong Kong with the principal

components approach.56

Thus, in this paper we complement existing literature on the seasonality

of China’s energy by investigating the seasonal patterns of coal and

4 There is one exception in Yu et al (2011) that investigate the seasonal effects of wind
energy across the different transmission grids. However, these authors do not consider the
seasonal behavior of each region for the most important sources of energy in China.
5
However, energy aspects have received considerable interest for other industrial countries
like in Yu and Choi (1985), and Erol and Yu (1987), and for other developing countries
some analysis is provided in Huang et al., (2008) and Beenstock et al., (1999).
6 Other works in the case of China on energy issues analyze the causes of the decrease in

energy intensity like in Garbaccio et al., (1999), Zhang (2003), Fisher-Vanden et al., (2004),
Liao et al., (2007) and Ma and Stern (2008) or in forecasting the demand for energy like in
Crompton and Wu (2005), Adam and Shachmurove (2008) and Dong et al., 2010). In
addition, evidence supporting the energy-growth relationship is provided in Yuan et al.,
(2007) and Yuan et al., (2008).
[5]
electricity production of each individual Chinese province. In particular, we

analyze whether these seasonal patterns differ depending on the type of

energy examined, the nature of the province, and the time period. The

monthly data used covers the period January 1996 through August 2010,

which includes the most important economic events in the Chinese

economy like the Asian and energy crises, electricity shortages and the

current global financial and economic crisis. The analysis is performed by

using the unobserved-components model developed by Harvey (1989) and

applied by Hunt and Judge (2003), Hunt and Ninomiya (2003), Dilaver and

Hunt (2011) and Sa’ad (2011) to the empirical modeling of energy demand

and seasonal anomalies.

By analyzing the seasonal patterns of coal and electricity production

across Chinese regions, this paper contributes to the existing literature in

four aspects.

First, we analyze in detail coal and electricity production individually

instead of looking at aggregate and broad measures of energy, which

enables us to link our results with the grid transmission across provinces as

one of the explanations of the observed stochastic seasonality.

Second, we consider explicitly the spatial dimension by examining

individually the Chinese provinces, since their high degree of heterogeneity

is a well-known stylized fact. Thus, knowing their seasonal behavior in coal

[6]
and electricity may help policy makers to design an appropriate regional

energy policy or investors to better operate in the electricity market.

Third, by considering the structural time series framework we can

introduce into the model the stochastic or deterministic trend and seasonal

components. However, in the case of Chinese regions, allowing for the

stochastic character of these two components, especially the trend, is a more

realistic modeling strategy, due to its higher flexibility to account for

structural changes given the significant transformation of this economy.

Fourth, we use a rich dataset, which contains monthly data of coal and

electricity production. In the best of our knowledge, there is no previous

work in this field that uses monthly data at the provincial level in the case

of the Chinese economy, which makes this study singular, providing new

evidence of seasonal patterns of coal and electricity production by province.

Specifically in our fourth contribution, we find that seasonality is stochastic

for the majority of the provinces both in coal and electricity production (19

and 17 regions respectively). These seasonal patterns share some

similarities across Chinese provinces, i.e. we find a Lunar New-Year effect

in February and Summer and Winter effects in coal and electricity

production. However, some differences are observed across provinces. In

the Northern transmission grid, we detect a negative seasonality for the

Summer in coal production, but a positive one for electricity production.

[7]
This pattern is also observed in the case of Sichuan, Hubei and Hunan in

the central part of China. However, the most striking differences compared

with the Northern regions appear in Southern and Eastern provinces that

produce electricity, which are characterized by a positive seasonality in the

second half of the year and a negative one from January to April. On the

other hand, the time variation of the monthly seasonality over the

considered period also shows interesting regularities. This variation takes

the form of a decreasing December effect for the majority of those provinces

that display stochastic seasonality in coal. By contrast, in the case of

electricity the opposite movement is present for Summer months, like July

and August. Finally, once we control the estimates for temperature, income

and energy prices, we cannot observe substantial differences in the results.

The paper is organized as follows. Section 2 covers data and

methodological issues. In section 3 we report the empirical results. We

discuss our conclusions in Section 4.

2. Data and Methodology

The data used in this work consist of two macroeconomic time series for

each of the 30 provinces in China. We use monthly data from 1996:1 to

[8]
 2010:8.7 We focus on coal and electricity production. They are measured in

million Tons and billion KWH respectively. The source of this data is CEIC

and the National Bureau of Statistics of China (NBS).89 In addition, in the

subsequent stages of the analysis, we use temperature, industrial output,

cooking coal and electricity prices, also extracted from CEIC and NBS. This

allows us to check the robustness of our results in a similar way than Jalles

(2009).

We use Harvey’s (1989) approach based on the unobserved-components

model to investigate the seasonal patterns of the considered variables in the

structural time series framework (Engle, 1978).The attractiveness of this

approach is that it allows us identifying the salient features of the series.

This method has been characterized by its ability to decompose the series

into unobserved components such as trend, seasonal and irregular, which

have a direct interpretation (Harvey and Shephard, 1993).10

7 In this paper the covered period depends on the selected macroeconomic variable. For
instance for coal production the sample is from 1996:1 to 2010:3 and for electricity
production the period is from 1996:1 to 2010:8.
8 See Sinton (2001) and Fisher-Vanden et al., (2004) for the debate of the accuracy of the

energy statistics.
9 Notice that electricity could be generated from Thermal plants, Nuclear, Hydropower and

Wind, apart from the transformation of coal. Our variable here is total electricity
production.
10 A complementary way to investigate these issues is provided by analysis on seasonal

integration and cointegration and the associated tests and the methodology proposed by
Hyllebert et al (1990). However, as argued by Dilaver and Hunt (2011) “Harvey (1997)
criticizes the co-integration approach because of its ‘poor’ statistical properties and argues
that the co-integration technique is misleading. In structural time series modeling,
stationarity of time series does not have a fundamental role, therefore the structural time
[9]
 Thus, the formal statistical formulation of the unobserved-components

models for the logarithm of the considered variable
 is as follows11:

         (1)

where  is the trend,  the seasonal,  captures the AR(1) component in

errors, and  the irregular. All these components are stochastic, but they

can be deterministic in limiting cases.  is white noise, and stationary,  is

normally only stationary in first or second differences, while  is stationary

when multiplied by the seasonal summation operator, such as:

  Ι      ⋯   (2)

where s is the number of seasons, L is the lag operator and S(L) contains

both real and complex unit roots. Following Hylleberg et al (1990),  is said

to be seasonally integrated. In order to allow for the stochastic trend, the

autoregressive component and the trend are formulated as:

        ∽ 

0,   (3)
      ∽ 
0,   (4)
  !   " " ∽ 
0, # 
5

Equation (3) collapses to a random walk plus drift if  = 0, and to a

deterministic linear trend if  = 0 as well. Setting  to zero when  is

series modeling approach combines the flexibility of time series with the interpretation of
regression analysis (Harvey, 1997, and Harvey and Shephard, 1993)”.
11 We have omitted the subscripts of each province for simplicity.

[10]
 positive tends to give a trend which changes relatively smoothly (Harvey

and Jaeger, 1993). As regards seasonality, we prefer the trigonometric

seasonality over seasonal dummies for its higher flexibility, which also can

be expressed as:

/
  ∑&( & (6)

All the disturbances are assumed mutually uncorrelated, and the extent

to which the trend and seasonal components evolve over time depends on

the parameters σ* , σ+ , σ, and , σ- that can be estimated by maximum

likelihood (Harvey, 1989). After this step, the trend and seasonal

components may be extracted by a smoothing algorithm (Koopman, 1993).

All the estimations are performed with STAMP version 8.10 (Koopman et

al., 1995).

Diagnostic tests are performed on the residuals following Harvey and

Koopman (1992). However, in order to restore the normality assumption,

intervention dummies must be introduced into the model.12 This is

particularly relevant in the case of the Chinese economy, since the period

that we investigate covers the Asian crisis (1997- 1998), the energy crisis

(2000 - 2001), the energy shortages (2004) and the current global financial

and economic crisis (2007-2008). Normality is tested with the Jarque-Bera

12 We have omitted this information to save space in the paper, however it is available upon
request from the authors.
[11]
statistics which is distributed as χ2 under the null hypothesis of normally-

distributed errors. H(h) is the heteroskedasticity test statistics distributed as

a F(h,h) with (h,h) degrees of freedom under the null of homocedasticity.

Q(P,d) is the Ljung Box statistics based on the sum of the first P

autocorrelations and is tested against a χ2 distribution with d degrees of

freedom. There, the null hypothesis of no autocorrelation is tested against

the alternative of autocorrelation. Finally, for each residual component, we

report the Browman–Shenton test to detect skewness and kurtosis. The

rejection of the null hypothesis implies that these features are present in the

model.

3. Results

The discrimination between deterministic and stochastic seasonality

concludes in favor of the latter when the standard deviation of the

disturbances of the stochastic components is different from zero. This

information is presented in Table 1 for coal production and in Table 2 for

electricity production. The reliability of the inference made is assessed by

specification tests reported in the Appendix. Moreover, in Tables 3 and 4

are presented the seasonal effects in the last year of the sample (the final

state) in the case of coal and electricity production respectively for those

provinces displaying either deterministic or stochastic seasonality.

[12]
However, for those regions with time-varying seasonality this information

is complemented with figures (a)-(d) that show some typical examples of

the evolution over time of seasonal patterns for both types of energy

examined across Chinese provinces. The robustness of this analysis is

shown in Table 5 and in Table 6 is presented the income elasticity of coal

and electricity.

3.1 Coal Production

In Table 1 are reported the two types of results that are generated when

using this approach to analyze seasonality. On the one hand, we can find

whether seasonality evolves over time (i.e. stochastic), or remains constant

over the considered period (i.e. is deterministic). This information, from a

statistical point of view, is captured by the q-ratio associated with the

seasonal component in Table 1. It reports the estimated standard deviation

on the largest standard deviation of the seasonal component. In the case of

stochastic seasonality, the q-ratio is larger than zero and in the case of

deterministic seasonality such ratio is zero, and therefore is not reported in

the tables. It is possible to test in a similar way if the remaining components

(slope, AR(1), level, and irregular) are stochastic or deterministic and if they

are present in the model.

[13]
 Table 1: Standard Deviation of coal production with Dummies, q-ratio
Seasonal Slope AR(1) Level Irregular ρ
East
Shanghai
Beijing 0.004[0.03] 0.093 [0.68] 0.003 [0.02] 0.137[1.00] 0.95
Tianjin
Liaoning 0.004[0.15] 0.064[2.24] 0.007 [0.25] 0.028[1.00] 0.92
Jiangsu 0.001[0.17] 0.0381[4.00] 0.009[1.00] 0.65
Zhejiang 0.002[0.05] 0.049[1.00] 0.044[0.90] 0.17
Guangdong 0.004[0.04] 0.086[0.94] 0.041[0.44] 0.091[1.00] 0.64
Hainan
Shandong 0.025[1.00] 0.022[0.88] 0.025[0.99] 0.00
Fujian 0.002[0.02] 0.002[0.03] 0.086[1.00] 0.38
Guangxi 0.109[1.04] 0.019[0.18] 0.105 [1.00] 0.80
Hebei 0.039[1.00] 0.57
Central
Heilongjiang 0.060[1.00] 0.008[0.13] 0.46
Jilin 0.003[0.04] 0.048[0.55] 0.021[0.24] 0.088[1.00] 0.49
Hubei 0.005[0.04] 0.058[0.46] 0.125[1.00] 0.88
Shanxi 0.001[0.01] 0.076[1.00] 0.011 [0.15] 0.000[0.01] 0.80
Hunan 0.002[0.06] 0.002[0.08] 0.116[3.79] 0.030 [1.00] 0.83
Anhui 0.001[0.04] 0.038[1.55] 0.007[0.31] 0.024[1.00] 0.94
Jiangxi 0.002[0.01] 0.002[0.01] 0.116[1.00] 0.048[0.41] 0.83
Henan 0.002[0.03] 0.081[1.00] 0.80
Inner
Mongolia 0.008[0.33] 0.001[0.07] 0.000[0.01] 0.024[1.00] 0.99
West
Sichuan 0.002[0.09] 0.001[0.07] 0.075[3.32] 0.022[1.00] 0.52
Chongqing
Xinjiang 0.039[0.64] 0.061[1.00] 0.041[0.67] 0.59
Qinghai 0.020[0.17] 0.176[1.42] 0.123[1.00] 0.98
Ningxia 0.001[0.01] 0.001[0.01] 0.085[1.00] 0.30
Gansu 0.004[0.06] 0.030[0.45] 0.015[0.22] 0.066[1.00] 0.98
Shaanxi 0.005[0.06] 0.074[1.00] 0.81
Yunnan 0.003[0.02] 0.003[0.02] 0.114[1.00] 0.70
Guizhou 0.106[2.34] 0.035[0.77] 0.045 [1.00] 0.80
Note: Each column represents the value of q-ratio for each of the unobserved-components considered in
this work –seasonal, slope, AR(1), the level and the irregular. The last column shows the correlation
coefficient. The same notation is used in the Table 2.

In the Northern grid, which is divided into North Eastern, North-

Western and Northern grids, Jilin and Liaoning show stochastic seasonality
[14]
 and constitute a small cluster. In addition, in the North, for the two most

important producers of coal (Shanxi and Inner Mongolia), along with

Beijing, a similar behavior is observed, while in the North-West seasonality

is stochastic in the case of Shaanxi, Gansu, Qinghai and Ningxia. In the

Eastern and Central grids, all the provinces that belong to these grids

display stochastic seasonality, except Shanghai and Chongqing, while in the

South of China, stochastic seasonality is only observed in Yunnan.

Besides in some cases the level component is deterministic (Table 1),

which is likely caused by the existence of structural changes that are

captured by level-break dummies. These breaks appear mainly during the

Asian and energy crises, which influence the seasonal pattern of coal

production.13 Furthermore, in the same table it is possible to observe that

the slope component in the majority of the cases is deterministic, and the

AR(1) component is present in most of the cases.

Table A1 in the Appendix reports the specification tests for each

province, including the likelihood and the standard error along with a

battery of mis-specification tests. These models do not display any

autocorrelation, non-normality and heteroscedasticity at the 1%, 5% and

10% levels of significance depending on the specification. However, a small

kurtosis is detected for the case of Hubei in the irregular and level

13 We estimated in a subsample these cases, and the level component became stochastic.
[15]
residuals. Nonetheless, apart from the latter case, these models behave

adequately for statistical inference.

Once the type of seasonality across Chinese regions is known, it is

essential to investigate its evolution over time and the differences among

provinces. This information is presented in Table 3, which reports the

seasonal patterns of the final stage for each province and for each type of

seasonality. In the case of those regions that display stochastic seasonality,

this analysis is complemented by figures (a) and (b), which provide an

illustrative example of how the seasonal patterns evolve over time.

From our results, it is possible to conclude on the existence of important

differences between regions that belong to the Northern and Central

transmission grids and provinces that appear in the Southern and Eastern

grids. This result is expected since the majority of coal is produced in the

former provinces, while electricity is generated in the latter, the seasonal

patterns of both types of energies being different.

The Northern and Central transmission grids share common stochastic

seasonal anomalies. First, we find, as in the case of stock markets in many

countries as we have shown earlier, a negative seasonality in January and

February, the so-called Lunar-New-Year effect, for all the provinces that

belong to these two grids and also in the case of Fujian and Zhejiang in the

Eastern grid and Yunnan in the Southern one. Second, we find a Summer
[16]
effect in the North-Eastern and North-Western grids, as well as in the cases

of Yunnan in the South and in Sichuan, Hubei and Jiangxi in the Central

grid. Third, in many cases seasonality becomes positive from March to June

(Spring effect) such as in the case of Jilin, Liaoning, Beijing, Shanxi, Gansu,

Shaanxi, Fujian, Anhui, Yunnan and all Central provinces. Here, there are

some singularities for some provinces like Inner Mongolia where

seasonality is positive from May to June, and Jiangsu from March to May.

Such a Spring effect is expected since after holidays firms start to operate

again and require extra energy. Fourth, November and December (so-called

December effect) show a positive seasonality in the North-Eastern grid, in

Shaanxi and Gansu in the North-West, in all Central and Eastern provinces,

as well as in Yunnan in the South. However, some differences arise for

example in Beijing and Shanxi, where seasonality becomes positive in July,

while for some other regions we find that it is negative. In the case of

Eastern regions seasonality in the second half of the year is positive.

In the case of provinces that display determinist seasonality, we report

the seasonal effect in the final stage in Table 3. Common features are

present, such as the Lunar New-Year effect in Hebei, Heilongjiang, Shandong,

Guangdong, Guangxi, Hainan, Guizhou, and Xinjiang. The latter province

displays a singularity since its negative seasonality lasts from January until

August, probably due to its location.

[17]
Table 3: Seasonal Effect. Final Stage. Coal Production (coefficient in bold and p-
value in italics)
Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
Provinces with Stochastic Seasonality
Beijing -0.24 -0.45 0.18 0.11 0.10 0.12 0.11 0.04 -0.03 -0.05 0.06 0.06
0.00 0.00 0.01 0.16 0.19 0.10 0.16 0.61 0.74 0.47 0.44 0.39
Fujian -0.06 -0.56 0.08 0.05 0.09 0.15 0.02 0.00 0.05 0.07 0.03 0.07
0.18 0.00 0.04 0.23 0.03 0.00 0.59 0.95 0.19 0.10 0.40 0.08
Jiangsu 0.05 -0.01 0.05 0.02 0.02 0.02 0.01 -0.02 -0.02 -0.01 -0.02 -0.09
0.02 0.56 0.02 0.49 0.42 0.30 0.78 0.44 0.44 0.65 0.24 0.00
Liaoning -0.04 -0.23 0.01 0.03 0.06 0.13 -0.01 0.02 0.02 -0.08 0.02 0.05
0.30 0.00 0.75 0.56 0.16 0.00 0.87 0.61 0.54 0.04 0.54 0.34
Zhejiang 0.00 -0.07 -0.05 -0.01 0.01 0.06 0.05 0.00 0.01 0.03 0.04 -0.06
0.93 0.05 0.20 0.88 0.83 0.14 0.17 0.93 0.89 0.49 0.29 0.12
Anhui 0.03 -0.03 0.04 0.02 0.02 0.01 0.00 -0.02 -0.02 -0.02 -0.03 0.00
0.05 0.04 0.01 0.27 0.26 0.45 0.90 0.16 0.34 0.25 0.10 0.85
Henan -0.06 -0.19 -0.09 -0.03 0.01 0.07 0.07 0.10 -0.02 0.01 0.02 0.11
0.07 0.00 0.01 0.44 0.80 0.06 0.06 0.01 0.52 0.78 0.59 0.00
Hubei -0.19 -0.97 0.04 0.00 0.09 0.35 0.03 0.00 0.11 0.03 0.21 0.32
0.01 0.00 0.56 0.96 0.24 0.00 0.74 0.95 0.16 0.70 0.00 0.00
Hunan -0.14 -0.52 0.02 0.03 0.02 0.07 0.03 0.04 0.07 0.06 0.13 0.20
0.00 0.00 0.64 0.39 0.65 0.04 0.44 0.24 0.08 0.07 0.00 0.00
Inner Mongolia -0.05 -0.17 0.03 -0.04 0.03 0.13 0.05 0.05 0.09 0.09 0.11 -0.34
0.27 0.00 0.45 0.58 0.62 0.04 0.40 0.34 0.11 0.07 0.03 0.00
Jiangxi -0.19 -0.34 -0.13 0.03 0.05 0.05 -0.02 0.00 0.04 0.08 0.21 0.22
0.00 0.00 0.00 0.52 0.22 0.21 0.60 0.97 0.29 0.06 0.00 0.00
Jilin -0.24 -0.28 0.05 0.00 0.11 0.19 0.09 -0.01 -0.01 0.00 0.04 0.05
0.00 0.00 0.30 0.95 0.11 0.00 0.12 0.82 0.85 0.94 0.49 0.32
Shanxi -0.17 -0.24 0.03 0.03 0.07 0.12 -0.01 0.00 0.01 0.00 0.06 0.09
0.00 0.00 0.05 0.17 0.00 0.00 0.41 0.94 0.65 0.80 0.00 0.00
Gansu -0.18 -0.11 0.07 -0.03 0.03 0.10 0.04 -0.03 0.08 0.02 0.05 -0.02
0.00 0.02 0.15 0.63 0.64 0.06 0.48 0.50 0.13 0.71 0.32 0.67
Ningxia -0.07 -0.18 0.03 0.06 0.05 0.05 -0.04 -0.02 0.03 0.03 0.09 -0.02
0.03 0.00 0.42 0.11 0.17 0.16 0.28 0.52 0.36 0.35 0.01 0.63
Shaanxi 0.00 -0.34 0.01 -0.14 0.08 0.17 0.05 -0.04 0.00 0.02 0.06 0.12
0.93 0.00 0.81 0.01 0.16 0.00 0.34 0.43 0.96 0.67 0.16 0.01
Sichuan -0.14 -0.22 0.12 0.03 -0.01 0.17 -0.05 -0.12 -0.02 0.03 0.07 0.15
0.00 0.00 0.00 0.44 0.75 0.00 0.17 0.00 0.49 0.32 0.04 0.00
Qinghai -1.20 0.41 -0.21 0.40 0.24 0.44 0.36 0.41 -0.14 -0.25 0.13 -0.58
0.00 0.00 0.11 0.06 0.23 0.03 0.06 0.03 0.44 0.14 0.43 0.01
Yunnan 0.00 -0.20 -0.01 0.13 0.04 0.03 -0.07 -0.09 -0.05 0.02 0.01 0.18
0.97 0.00 0.76 0.01 0.39 0.56 0.15 0.07 0.31 0.64 0.90 0.00

[18]
 Provinces with Deterministic
seasonality

Guangdong -0.11 -0.50 0.00 0.09 0.02 0.08 -0.04 -0.05 -0.11 0.06 0.16 0.41
0.03 0.00 0.94 0.07 0.63 0.11 0.39 0.26 0.03 0.23 0.00 0.00
Guangxi -0.01 -0.24 0.07 0.02 -0.02 0.00 -0.15 -0.13 -0.08 -0.03 0.22 0.36
0.65 0.00 0.04 0.52 0.59 0.90 0.00 0.00 0.02 0.36 0.00 0.00
Guizhou -0.18 -0.38 -0.03 0.04 0.03 0.04 -0.02 0.02 0.02 0.09 0.15 0.23
0.00 0.00 0.20 0.10 0.22 0.12 0.46 0.49 0.36 0.00 0.00 0.00
Hebei -0.05 -0.15 0.04 0.02 0.06 0.03 -0.03 -0.02 0.00 0.00 0.05 0.05
0.00 0.00 0.00 0.03 0.00 0.00 0.00 0.01 0.91 0.92 0.00 0.00
Heilongjiang -0.07 -0.30 0.04 0.01 0.03 0.08 -0.01 -0.01 0.01 0.03 0.09 0.10
0.00 0.00 0.01 0.30 0.03 0.00 0.55 0.64 0.69 0.03 0.00 0.00
Hainan -0.06 0.07 0.04 -0.05 -0.01 -0.09 -0.01 0.00 0.02 -0.02 0.05 0.07
0.30 0.28 0.48 0.39 0.89 0.18 0.87 0.98 0.81 0.76 0.45 0.29
Shandong 0.01 -0.08 0.05 0.02 0.02 0.00 -0.02 -0.03 -0.02 0.00 0.00 0.05
0.44 0.00 0.00 0.09 0.03 0.88 0.05 0.01 0.04 0.99 0.93 0.00
Xinjiang -0.16 -0.23 -0.08 -0.06 -0.11 -0.03 -0.08 -0.01 0.10 0.16 0.27 0.22
0.00 0.00 0.00 0.01 0.00 0.13 0.00 0.64 0.00 0.00 0.00 0.00

Besides, the Summer effect is also noticed, especially in July and August,

in a majority of provinces; however its duration varies depending on the

region, i.e. in Southern provinces, like Hainan and Guangxi, the Summer

effect comes earlier, and in an Eastern provinces like Shandong that effect is

prolonged until November.

Finally, the study of the evolution of the monthly seasonality from 1996

to 2010 provides three main findings. First, we observe a relative decrease

in the production of coal in December in the case of provinces that belong to

the Northern grids compared to other months. However, the opposite

behavior is present in July for some regions located in the Northern and

Central grids and in both January and February for some Eastern and Central

[19]
provinces. In addition, we can also detect some singularities like in October,

where regions such as Gansu, Ningxia, Zhejiang and Hunan increase more

the production of coal over the considered period than other months, while

the opposite is found in Anhui, Inner Mongolia and Liaoning. These

differences are also present in November, when for Jiangxi, and Hunan are

observed a relative increase of coal over time, while in the case of Fujian we

find the opposite.

(a) Jilin

[20]
 (b) Fujian

Note: Monthly Seasonal in the case of Jilin and Fujian.

3.2 Electricity Production

The uneven distribution of energy resources across China’s regions

makes necessary to go beyond the analysis of coal production, and consider

the second most important source of energy, that is, electricity. This

analysis allows us to assess the differences across regions between the two

types of energy in terms of seasonality and their time variation. Table 2

presents the results of the q-ratio that, as we stated earlier, allows us to

discriminate between stochastic and deterministic seasonality across

regions. Then, in Table 4 and figures (c) and (d) their evolution over time is

shown.

[21]
 As expected, in the Southern grid where the majority of electricity is

generated, we find that all provinces display stochastic seasonality. A

similar behavior is found in Central and North-Western grids for all

provinces, except Henan and Chongqing in the former and Ningxia in the

latter. However, in the North and East there are fewer jurisdictions that

display stochastic seasonality. Jilin and Liaoning constitute a small cluster

in terms of electricity, similar to the one we detected earlier for coal, and the

same conclusion can be drawn in the case of Beijing and Shanxi in the

North and Fujian in the East.

As we argued earlier in the case of coal production, level breaks are

present in the case of electricity production, which explains why the level

component becomes deterministic in four provinces. In this case we detect

not only the Asian and energy crises, but also some positive shocks, which

coincide with a period of fast development, and then a growing demand for

energy.14 In addition, as happens before, the slope plays a minor role in

these models, and the AR(1) component is present in the majority of the

cases.

14 As before, we estimated the model again in a subsample, and the level component
became stochastic.
[22]
 Table 2: Standard Deviation of electricity production with Dummies: q-ratio
Seasonal Slope AR(1) Level Irregular ρ
East
Shanghai 0.048[2.42] 0.009[0.49] 0.020[1.00] 0.31
Beijing 0.001[0.03] 0.065[2.45] 0.015[0.39] 0.046[1.00] 0.70
Tianjin 0.074[1.00] 0.57
Liaoning 0.001[0.05] 0.046[2.06] 0.016[0.75] 0.022[1.00] 0.78
Jiangsu 0.000[0.02] 0.015[0.45] 0.005[0.15] 0.034[1.00] 0.93
Zhejiang 0.001[1.16] 0.000[0.10] 0.001[1.00] 0.88
Guangdong 0.001[0.05] 0.030[1.10] 0.027[1.00] 0.19
Hainan 0.001[0.07] 0.024[0.99] 0.017[0.70] 0.024[1.00] 0.00
Shandong 0.000[0.04] 0.028[1.56] 0.018[1.00] 0.68
Fujian 0.001[0.04] 0.035[0.98] 0.011[0.32] 0.036[1.00] 0.92
Guangxi 0.001[0.02] 0.000[0.01] 0.066[1.00] 0.016[0.24] 0.027[0.41] 0.81
Hebei 0.043[2.40] 0.005[0.28] 0.018[1.00] 0.65
Central
Heilongjiang 0.057[3.86] 0.012[0.82] 0.014[1.00] 0.56
Jilin 0.005[0.31] 0.004[0.22] 0.010[0.54] 0.005[0.31] 0.018[1.00] 0.84
Hubei 0.000[0.02] 0.001[0.02] 0.028[0.51] 0.042[1.00] 0.51
Shanxi 0.000[0.01] 0.001[0.03] 0.030[1.00] 0.007[0.25] 0.026[0.86] 0.63
Hunan 0.001[0.03] 0.070[1.45] 0.001[0.03] 0.048[1.00] 0.92
Anhui 0.000[0.01] 0.015[0.31] 0.008[0.16] 0.048[1.00] 0.98
Jiangxi 0.001[0.02] 0.060[1.30] 0.016[0.35] 0.046[1.00] 0.86
Henan 0.000[0.10] 0.042[5.68] 0.007[1.00] 0.57
Inner Mongolia 0.001[0.02] 0.058[1.00] 0.32
West
Sichuan 0.003[0.21] 0.001[0.07] 0.048[2.91] 0.016[1.00] 0.72
Chongqing 0.000[0.01] 0.075[1.58] 0.047[1.00] 0.48
Xinjiang 0.002[0.18] 0.004[0.36] 0.010[0.79] 0.013[1.00] 0.07
Qinghai 0.006[0.30] 0.106[5.36] 0.037[1.89] 0.019[1.00] 0.56
Ningxia 0.084[6.54] 0.039[3.08] 0.012[1.00] 0.78
Gansu 0.003[0.06] 0.029[0.60] 0.020[0.41] 0.049[1.00] 0.73
Shaanxi 0.001[0.04] 0.000[0.02] 0.032[1.00] 0.017[0.53] 0.031[0.97] 0.13
Yunnan 0.002[2.80] 0.087[84.1] 0.001[1.00] 0.69
Guizhou 0.002[0.05] 0.049[1.00]

[23]
Table 4: Seasonal Effects. Final Stage. Electricity Production (coefficient in bold and
p-value in italics)
Jan Feb March April May June July Aug. Sept. Oct. Nov. Dec.
Provinces with Stochastic
Seasonality

Beijing 0.16 0.06 0.03 -0.20 -0.12 -0.02 0.05 0.05 -0.14 -0.10 0.05 0.17
0.00 0.01 0.18 0.00 0.00 0.52 0.05 0.03 0.00 0.00 0.02 0.00
Fujian 0.00 -0.25 -0.11 0.01 0.00 0.04 0.15 0.15 0.11 -0.02 -0.05 -0.03
0.98 0.00 0.00 0.56 0.94 0.10 0.00 0.00 0.00 0.49 0.02 0.17
Guangdong -0.10 -0.23 -0.02 -0.01 0.03 0.03 0.10 0.12 0.10 0.01 -0.02 0.01
0.00 0.00 0.19 0.46 0.12 0.13 0.00 0.00 0.00 0.57 0.35 0.76
Guangxi -0.03 -0.23 0.00 -0.05 0.04 0.06 0.11 0.13 0.06 -0.07 -0.08 0.05
0.33 0.00 0.89 0.05 0.12 0.01 0.00 0.00 0.02 0.01 0.00 0.04
Hainan -0.05 -0.20 -0.03 0.00 0.09 0.08 0.12 0.09 0.04 -0.03 -0.06 -0.05
0.05 0.00 0.27 0.84 0.00 0.00 0.00 0.00 0.11 0.21 0.03 0.03
Liaoning 0.04 -0.11 0.06 -0.02 -0.04 -0.03 0.03 0.02 -0.02 -0.03 0.01 0.08
0.04 0.00 0.01 0.29 0.03 0.17 0.09 0.29 0.32 0.19 0.59 0.00
Hubei -0.24 -0.30 -0.19 -0.15 0.06 0.15 0.31 0.31 0.20 0.07 -0.04 -0.17
0.00 0.00 0.00 0.00 0.11 0.00 0.00 0.00 0.00 0.10 0.34 0.00
Hunan -0.04 -0.20 -0.02 -0.04 0.01 0.05 0.14 0.13 0.00 -0.04 -0.07 0.09
0.10 0.00 0.40 0.11 0.65 0.07 0.00 0.00 0.96 0.20 0.01 0.00
Jilin -0.02 -0.06 0.04 -0.04 0.00 0.00 0.01 0.07 -0.12 -0.03 0.00 0.15
0.62 0.09 0.18 0.23 0.98 0.91 0.70 0.03 0.00 0.42 0.96 0.00
Jiangxi 0.01 -0.22 0.01 -0.06 -0.06 -0.02 0.13 0.14 0.01 -0.01 -0.01 0.09
0.57 0.00 0.78 0.01 0.01 0.37 0.00 0.00 0.66 0.57 0.75 0.00
Shanxi 0.02 -0.10 0.04 0.00 0.00 -0.01 0.02 0.02 -0.06 -0.03 0.02 0.07
0.13 0.00 0.00 0.78 0.95 0.34 0.07 0.13 0.00 0.05 0.17 0.00
Gansu -0.01 -0.09 0.10 -0.05 0.03 0.03 0.02 -0.03 -0.11 -0.02 0.04 0.09
0.88 0.03 0.01 0.17 0.37 0.47 0.60 0.44 0.01 0.73 0.42 0.04
Guizhou -0.06 -0.32 -0.01 -0.05 0.01 -0.03 0.11 0.12 0.11 0.06 0.02 0.03
0.09 0.00 0.73 0.17 0.66 0.38 0.00 0.00 0.00 0.11 0.57 0.39
Qinghai -0.10 -0.20 -0.05 0.05 0.07 0.11 0.06 0.07 0.00 0.00 0.00 -0.02
0.13 0.00 0.43 0.44 0.27 0.09 0.32 0.26 0.95 0.99 0.97 0.80
Shaanxi 0.09 -0.09 0.07 0.02 -0.01 -0.04 0.04 0.00 -0.12 -0.11 0.00 0.14
0.00 0.00 0.00 0.34 0.62 0.08 0.11 0.98 0.00 0.00 0.99 0.00
Sichuan -0.10 -0.20 -0.11 -0.16 -0.13 0.10 0.12 0.19 0.14 0.06 0.01 0.09
0.02 0.00 0.01 0.00 0.00 0.01 0.00 0.00 0.01 0.18 0.90 0.05
Yunnan -0.07 -0.36 -0.13 -0.12 0.02 0.04 0.13 0.17 0.16 0.13 0.01 0.02
0.10 0.00 0.00 0.00 0.51 0.24 0.00 0.00 0.00 0.00 0.83 0.67
Xinjiang -0.07 -0.18 -0.05 -0.04 -0.03 0.09 0.14 0.14 -0.01 0.00 0.03 -0.01
0.00 0.00 0.02 0.09 0.12 0.00 0.00 0.00 0.78 0.92 0.29 0.58

Provinces with Deterministic

seasonality

[24]
Anhui 0.02 -0.18 -0.01 -0.07 -0.04 0.00 0.15 0.15 0.00 -0.03 -0.04 0.04
0.13 0.00 0.51 0.00 0.00 0.82 0.00 0.00 0.98 0.04 0.00 0.00
Chongqing 0.08 -0.07 0.08 0.04 -0.01 -0.05 0.01 0.01 -0.09 -0.16 -0.03 0.19
0.00 0.00 0.00 0.08 0.72 0.01 0.54 0.69 0.00 0.00 0.20 0.00
Hebei 0.00 -0.19 0.05 0.03 0.04 0.03 0.07 0.06 -0.07 -0.07 -0.01 0.07
0.97 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.23 0.00
Heilongjiang 0.11 0.02 0.07 -0.05 -0.07 -0.08 -0.07 -0.07 -0.10 0.00 0.06 0.17
0.00 0.11 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.92 0.00 0.00
Henan 0.04 -0.09 0.03 -0.01 -0.02 0.00 0.06 0.07 -0.04 -0.07 -0.02 0.07
0.00 0.00 0.01 0.50 0.02 0.78 0.00 0.00 0.00 0.00 0.02 0.00
Inner Mongolia 0.04 -0.03 0.03 -0.05 -0.02 -0.02 -0.02 -0.03 -0.05 0.00 0.05 0.11
0.00 0.03 0.04 0.00 0.27 0.14 0.10 0.04 0.00 0.79 0.00 0.00
Jiangsu 0.02 -0.20 0.00 -0.03 -0.02 -0.01 0.11 0.12 0.03 -0.04 -0.05 0.05
0.05 0.00 1.00 0.00 0.01 0.44 0.00 0.00 0.00 0.00 0.00 0.00
Ningxia 0.05 -0.03 0.04 0.01 0.02 0.00 0.00 -0.01 -0.09 -0.02 0.01 0.02
0.01 0.06 0.02 0.44 0.18 1.00 0.79 0.48 0.00 0.20 0.62 0.33
Shanghai 0.08 -0.12 0.00 -0.08 -0.10 -0.05 0.16 0.15 -0.01 -0.06 -0.05 0.08
0.00 0.00 0.79 0.00 0.00 0.00 0.00 0.00 0.67 0.00 0.00 0.00
Shandong 0.03 -0.10 0.04 0.00 -0.02 -0.01 0.05 0.04 -0.04 -0.05 -0.02 0.07
0.00 0.00 0.00 0.85 0.04 0.05 0.00 0.00 0.00 0.00 0.03 0.00
Tianjin 0.03 -0.15 0.05 -0.05 -0.06 0.01 0.10 0.08 -0.02 -0.07 0.00 0.08
0.05 0.00 0.01 0.01 0.00 0.64 0.00 0.00 0.34 0.00 0.86 0.00
Zhejiang -0.01 -0.28 0.04 0.01 0.00 -0.01 0.10 0.11 0.03 0.00 -0.03 0.03
0.60 0.00 0.00 0.18 0.86 0.49 0.00 0.00 0.00 0.95 0.00 0.00

In Table A2 in the Appendix, we report for each province the test of the

hypotheses of normality, homoscedasticity and absence of autocorrelation,

which are accepted at the 1%, 5% and 10% levels of significance depending

on the specification. However, for the case of Yunnan a small kurtosis is

detected both in the irregular and level residuals, while for Heilongjiang it

is only observed in the irregular component. On the other hand, in the case

of Guangdong, a small skewness is detected in the level residuals.

Nonetheless, in spite of these facts, all the models are well-behaved for

statistical inference.

[25]
 On the other hand, it is useful to know whether seasonal patterns in

electricity generation differ from those in coal extraction and the differences

that exist across provinces. This information is captured by the monthly

seasonality represented in Table 4 and Figures (c) and (d), that as before we

use as illustrative examples to describe our results.

We observe significant differences in the seasonal patterns of electricity

and coal production, especially between the North and South of China.

Although, we found this behavior before for coal, it is corroborated once

seasonality in electricity is investigated. In the latter case, there are more

regions displaying stochastic seasonality in the Southern, North-Western

and Central grids and there are fewer provinces with this feature in those

grids where the production of coal predominates.

Other differences are observed with regards to the Summer period, since

seasonality in electricity production is positive and is prolonged until

September in all provinces. However, we found earlier that for coal

production it was negative. In addition, the Lunar New-Year effect changes to

a positive seasonality in Beijing and Shanxi in the Northern grid, Liaoning

and Jilin in the North-Eastern grid, Jiangxi in the Central one and Shaanxi

in the North-Western grid. For other jurisdictions, however, the negative

seasonality not only covers January and February, but is even prolonged

until April, especially in provinces located in the South of China. This

[26]
decrease of electricity production until April is also observed in some

Central and North-Western grids. However, in spite of these differences, in

the majority of the regions, we find the same seasonal pattern in November

and December in both types of energy.

( c ) Shanxi

( d ) Guangdong

Note: Monthly Seasonal in the case of Shanxi and Guangdong.

[27]
 In Table 4, we report the seasonal effects in the final stage for provinces

that display stochastic and deterministic seasonality. While our previous

results on stochastic seasonality are confirmed in that table, an interesting

finding emerges with regards to some provinces that show deterministic

seasonality. For example, in the case of Inner Mongolia, we find that

seasonality becomes positive in the Summer for coal production, but it is

negative in electricity production. A similar effect is observed in

Heilongjiang. Since both regions are respectively located in the North and

the most Northern part of the North East of China, they probably alternate

the use of energy depending on the season, i.e. in the Summer they use coal,

but before and after these months (except for Lunar New-Year and Summer

Effects), they switch to electricity to satisfy the energy demand.

In the temporal dimension differences are also observed. For example, in

February is observed a relative decrease in electricity production in the case

of Guangxi, Guizhou, Hainan, Jilin, Liaoning, Yunnan, and Xinjiang

compared to other months. In contrast, relative increases of electricity

production are present in the Summer months like in June-August for

jurisdictions like Beijing, Fujian, Guangxi, Hubei, Jilin, Liaoning, Shanxi,

Sichuan, Yunnan, and Xingjian. Finally, the conclusions are mixed in

December. On the one hand, for regions like Guangdong, Guangxi and Jilin,

there is a relative increase of electricity production, while on the other hand

[28]
 for others like Gansu, Guizhou, Hubei, Qinghai, and Xinjiang the reverse is

observed.

Overall, we find substantial differences in terms of seasonality across

regions and also between the two types of energy. Besides, the time

variation displays some differences. Knowing such seasonal patterns

should be useful for regulators to design the regional and national energy

development policy in China.

3.3 Robustness of the Results and Policy Implications

One can argue that previous calendar anomalies found can be the result

of ignoring additional factors that account for these seasonal patterns. In

order to study the robustness of our previous results, we first include

industrial output and energy prices (cooking coal price and electricity price)

as exogenous variables in these new models, and subsequently temperature

is added as an additional regressor. Then, we proceed as before in

estimating the unobserved components model in the case of coal and

electricity production with intervention dummies.15

15 We report only a summary of the conclusions from our results to save space. However,
they are available upon request from the authors. Besides, we have deleted some
provinces due the lack of the data either for prices or industrial output.
[29]
 Table 5: Summary of the results based on standard deviation (q-ratio) of seasonal
component.

Coal A Coal B Electricity A Electricity B

East
Shangai NA NA Shanghai D D
Beijing NA NA Beijing D D
Liaoning S S Liaoning D D
Tianjin NA NA Tianjin D S
Jiangsu S S Jiangsu S S
Zhejiang D D Zhejiang D S
Guangdong D D Guangdong S S
Hainan NA NA Hainan S S
Shandong NA NA Shandong S S
Fujian NA NA Fujian S S
Guangxi D S Guangxi S S
Hebei D S Hebei D S
Central
Heilongjiang S S Heilongjiang S D
Jilin S S Jilin D D
Hubei S S Hubei S S
Shanxi S S Shanxi D D
Hunan S S Hunan S D
Anhui S D Anhui D D
Jiangxi S S Jiangxi D D
Henan S S Henan D D
Inner Mongolia S S Inner Mongolia S S
West
Sichuan D D Sichuan S S
Qinghai NA NA Qinghai NA NA
Ningxia S S Ningxia NA NA
Gansu NA NA Gansu S S
Shaanxi NA NA Shaanxi S S
Yunnan NA NA Yunnan S S
Guizhou NA NA Guizhou S S

Note: NA means that there is no data for this region in this analysis; D stands for deterministic seasonality
and S for the stochastic seasonality. In italics and in bold the changes compared with tables 1 and 2. Coal A
show the conclusions when income and price are included in the models, while Coal B refers when is
added in addition to these variables temperature. The same notation is applied to electricity production.
Due the lack of data in the analysis of electricity production the sample starts in 2003:1 until 2009:12.

[30]
 Table 6: Elasticity to income. Models conditioned by price
and temperature.
Electricity Coal
Hebei 0.44*** Liaoning 0.47***
Shanxi 0.16*** Jiangsu 1.02***
Inner Mongolia 0.50*** Guangxi 0.67***
Shanghai 0.23*** Hebei 0.81***
Jiangsu 0.88*** Sichuan 0.61***
Zhejiang 0.98*** Heilongjiang 0.50***
Fujian 0.63*** Jilin 0.73***
Jiangxi 0.60*** Hubei 1.75***
Shandong 1.03*** Shanxi 0.88***
Henan 0.80*** Henan 1.65***
Hunan 0.48** Inner Mongolia 0.60***
Guangdong 1.32***
Guangxi 0.29***
Hainan 0.20***
Gansu 0.74**
Note: *** denotes that this coefficient is significant at 1%, ** at 5%. In
the remaining regions, income is not significant and in consequence
it is not reported.

Having a well-specified model in all cases in terms of misspecification

tests, in Table 5 we present a summary of the conclusions on the type of

seasonality for both coal and electricity production. There on this basis, we

can conclude that in the case of coal production, the observed stochastic

seasonality found previously vanishes in two provinces (Zhejiang and

Heilongjiang) after the inclusion of income and prices as control variables,

but for the remaining regions our previous conclusions remain valid. When

temperature is taken into account, we find that Anhui switches to

deterministic seasonality and Guangxi and Hebei to the stochastic one.

However, apart from these three cases our initial conclusions remain

unchanged, showing that the movements in the seasonal patterns are

[31]
 driven by specific characteristics of the coal producing regions different

from temperature, income and prices.

On the other hand, in the case of electricity production, we find that,

when income and price are included in the models, for seven provinces

(Anhui, Beijing, Guangdong, Hunan, Inner Mongolia, Tianjin, and

Zhejiang,) seasonality becomes deterministic, but it remains stochastic for

the rest of the provinces. Moreover, we observe only few changes in our

conclusions when temperature is added as an additional explanatory

variable. Specifically, we find that Heilongjiang and Hunan now display

deterministic seasonality, while in the case of Hebei, Tianjin, and Zhejiang

seasonal patterns evolve over time. This implies that our findings are quite

robust and in the majority of the cases seasonality of energy in each region

is driven by specific characteristics or factors different from temperature,

income and energy prices. On the other hand, with respect to the seasonal

patterns in the final stage, results do not display notable differences when

these control variables are introduced into the model.16 Finally, in Table 6,

we report the income elasticity for electricity and coal production when it is

significant. From there, we can observe that there is a large difference in the

coefficient of income across regions showing the aforementioned

heterogeneity. Specifically, the income elasticity ranges from 0.16 to 1.32 in

16 This information it is available upon request from the authors to save space in the paper.
[32]
the case of electricity production, and from 0.47 to 1.75. in the case of coal.

However, the average for the whole nation in the case of electricity in urban

areas controlling for climate conditions is 0.797 (Asadoorian et al., 2008).

This evidence therefore also supports the idea that each region should be

analyzed individually and seasonality matters for the full understanding of

China’s energy situation. Besides, given that income is significant in few

regions our results suggest that not all regions have the same weight in

explaining the regional energy situation in China. This is important because

in consequence only few of them drive the energy sector for the economy as

a whole.

From the above results, we can highlight the following main conclusions:

a) Unlike previous work, we provide evidence that seasonality varies

over time for the majority of Chinese regions, even controlling our

estimates by income, price and temperature. This reveals that

seasonality needs to be properly modeled in order to proceed to the

following stage of any energy analysis, i.e. forecasting.

b) We observe significant differences in the seasonal patterns between

Northern and Southern regions in energy production. Thus, specific

energy policies should be designed to satisfy the demand, switching

from one type of energy to another according to the observed

seasonal anomalies to avoid any energy shortage.

[33]
 c) The switch of seasonality from stochastic to deterministic once the

control variables are introduced, is likely to be explained by the fact

that for these regions, key variables like prices, income and

temperature, influence calendar effects and the type of seasonality.

Thus, knowing this, policy-makers can adjust their policies in order to

control seasonal patterns. However, for the remaining provinces none

of these control factors are significant to account for seasonality and

one can guess that to some extent this is due to the policies of the

Chinese government.

4. Concluding Remarks

Modeling the stochastic character of energy indicators in the case of

China has been relatively neglected in the relevant literature despite its

enormous implications in statistical inference, since the omission of such

issue can a cause of bias in the estimates. Thus, this paper focuses first on

the relevance of accounting for seasonality to fully understand China’s

energy situation, and second, on the nature of seasonality – deterministic or

stochastic – that is present in each Chinese region. In addition, we analyze

the monthly seasonal patterns of coal and electricity production, and their

evolution over time from 1996 to 2010. To carry out this work, we used the

unobserved-components model developed by Harvey (1989). In the best of

[34]
our knowledge there was no prior empirical evidence on this issue based on

the use of both high frequency and provincial level data in the case of the

Chinese economy.

Our results indicate that there are significant differences in the seasonal

patterns between the Northern regions that produce coal and the Southern-

Eastern ones that generate electricity. Specifically, we found that the former

regions relatively produce less coal in summer and the later generate more

electricity in this period. In addition, for electricity production, in the South-

East of China, a negative seasonality is found in the first semester, but a

positive one in the second. Therefore, it seems that these regions switch

from one source of energy to another depending on the seasonal patterns to

satisfy the demand of energy. Furthermore, there are two common calendar

effects in both parts of China with some exceptions, that is, a Lunar New-

Year effect, in February, and a Winter effect, in November and December.

This can be explained by the observation that during holidays power plants

produce less energy since firms close, but before and after that period the

production of coal and electricity increases.

On the other hand, the time variation of the monthly seasonality over the

considered period also provides interesting insights, with a relative

decrease in the production of coal in December compared to other months

for the majority of those provinces that display stochastic seasonality. By

[35]
contrast, in the case of electricity the opposite evolution is found for the

Summer months, like July and August. Finally, once we control our

estimates by including price, income and temperature, we cannot observe

substantial differences in our results concerning the variation or stability of

seasonality over time. We have thus provided empirical evidence that

seasonality is stochastic, in the majority of the regions independently of the

source of energy that they produce. Therefore, the adequate modeling of

these two variables is essential, e.g. to perform forecasting, since the

omission of the stochastic character of the unobserved-components can be a

cause of bias in the statistical inference. The differences found above are

likely related to the characteristics of the Chinese provinces in terms of

economic structure, environment, urbanization rate, and the presence of the

non-state sector among other relevant factors.

The continuous reforms since the mid-eighties -until the recent upgraded

grid-transmission with the three corridors in the Northern, Central and

Southern parts of China which came into operation in 2005- should also

explain these findings. Without any doubt, this policy attempts to match the

increase in electricity demand in the most developed areas in China and to

avoid any shortage to guarantee regional economic development. Recently,

China has stated the intention to create a unified national power grid by

2020, and to have a modern power market in which plants can operate
[36]
 under market mechanisms, which in turn should be translated into

efficiency gains and higher productivity in the energy industry in the

future.17

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[39]
Appendix A: Table A1: Specification Tests, Coal Production, with dummies
Residuals Level Residuals Irregular Residuals
Log Likelihood Standard Error Normality Heterocedasticity Q-test Skewness Kurtosis Skewness Kurtosis Skewness Kurtosis
Beijing 232.04 0.16 1.08[0.27] H(49) = 0.82 Q(24,19)= 16.51 0.55[0.49] 0.13[0.71] 1.22[0.26] 0.14[0.70] 0.29[0.58] 0.03[0.85]
Fujian 300.16 0.09 0.47[0.63] H(47) = 0.73 Q(24,19)= 20.38 0.10[0.74] 0.75[0.38] 0.15[0.69] 0.06[0.79] 0.15[0.69] 0.78[0.37]
Guangdong 141.87 0.14 0.93[0.38] H(29) = 1.68 Q(24,19)= 13.87 0.75[0.38] 0.00[0.99] 2.58[0.10] 0.15[0.69] 1.55[0.21] 0.86[0.07]
Guangxi 262.95 0.13 0.36[0.71] H(50) = 1.50 Q(24,19)= 21.26 0.30[0.58] 0.24[0.61] 0.13[0.71] 0.42[0.51] 0.35[0.55] 0.34[0.55]
Hebei 369.32 0.02 0.65[0.51] H(39) = 1.57 Q(24,19)= 34.48 0.59[0.49] 0.07[0.78] 0.19[0.65] 12.56[0.00] 0.28[0.59] 10.12[0.00]
Jiangsu 431.28 0.03 1.77[0.07] H(48) = 0.87 Q(24,19)= 24.75 0.82[ 0.36] 0.92[0.33] 0.00[0.95] 1.60[0.20] 0.34[0.55] 0.53[0.46]
Liaoning 360.46 0.07 0.41[0.67] H(49) = 0.88 Q(24,19)= 28.39 0.37[0.53] 0.11[0.72] 1.78[0.18] 0.01[0.91] 0.90[0.34] 0.07[0.77]
Shandong 431.68 0.04 0.83[0.40] H(51) = 0.33 Q(24,19)= 15.98 0.52[0.46] 0.04[0.83] 0.01[0.88] 0.18[0.66] 0.06[0.79] 3.61[0.05]
Zhejiang 310.63 0.07 1.88[0.05] H(45) = 1.00 Q(24,19)= 16.49 0.02[0.87] 0.73[0.39] 1.73[0.18] 0.05[0.81] 0.04[0.83] 0.54[0.45]
Anhui 429.43 0.03 1.66[0.09] H(47) = 0.57 Q(24,19)= 10.58 0.95[0.32] 0.32[0.57] 0.18[0.66] 1.81[0.17] 0.00[0.94] 0.67[0.41]
Heilongjiang 371.32 0.05 0.43[0.63] H(47) = 0.59 Q(24,19)= 35.94 0.09[0.75] 0.01[0.89] 0.62[0.43] 0.01[0.90] 0.29[0.58] 0.00[0.97]
Henan 351.23 0.06 0.94[0.34] H(47) = 0.82 Q(24,19)= 18.93 0.77[0.37] 0.22[0.63] 1.24[0.26] 0.17[0.67] 0.96[0.32] 0.12[0.71]
Hubei 236.79 0.16 0.08[0.93] H(49) = 0.68 Q(24,19)= 21.69 0.07[0.78] 0.18[0.66] 0.02[0.87] 1.76[0.18] 1.23[0.26] 0.44[0.50]
Hunan 313.26 0.08 1.93[0.05] H(47) = 0.72 Q(24,19)= 31.72 1.07[0.30] 0.47[0.49] 4.26[0.03] 0.05[0.82] 0.02[0.87] 0.01[0.89]
Inner Mongolia 312.95 0.08 1.73[0.08] H(46) = 0.83 Q(24,19)= 26.07 0.59[0.43] 0.49[0.48] 1.73[0.18] 0.08[0.77] 0.32[0.56] 0.22[0.63]
Jilin 283.08 0.12 0.54[0.55] H(51) = 1.12 Q(24,19)= 19.23 0.47[0.48] 0.01[0.90] 0.00[0.94] 0.24[0.61] 0.00[0.92] 0.25[0.61]
Jiangxi 296.91 0.11 1.93[0.05] H(50) = 0.82 Q(24,19)= 21.97 0.36[0.54] 0.72[0.39] 0.24[0.62] 0.01[0.90] 0.18[0.66] 0.61[0.43]
Shanxi 378.32 0.05 2.10[0.03] H(47) = 1.08 Q(24,19)= 21.94 0.26[0.60] 0.84[0.35] 0.89[0.39] 0.01[0.90] 0.20[0.64] 0.64[0.42]
Gansu 309.90 0.09 0.99[0.31] H(48) = 1.08 Q(24,19)= 11.86 0.61[0.43] 0.07[0.78] 0.04[0.82] 1.97[0.16] 0.69[0.40] 0.85[0.35]
Guizhou 315.84 0.08 1.18[0.23] H(49) = 0.93 Q(24,19)= 21.12 0.00[ 0.98] 0.35[0.55] 0.00[0.95] 0.00[0.92] 0.05[0.81] 0.97[0.32]
Qinghai 174.72 0.23 0.63[0.52] H(49) = 1.55 Q(24,19)= 20.51 0.55[0.45] 0.01[0.91] 1.19[0.27] 1.77[0.18] 0.01[0.91] 0.14[0.70]
Ningxia 329.70 0.09 1.44[0.14] H(50) = 0.85 Q(24,19)= 31.83 1.29[0.25] 0.02[0.87] 0.00[0.92] 0.01[0.89] 0.00[0.92] 0.06[0.80]
Shaanxi 307.47 0.07 1.53[0.12] H(45) = 0.81 Q(24,19)= 19.98 0.49[0.48] 0.39[0.53] 0.03[0.85] 0.62[0.42] 0.01[0.81] 0.92[0.33]
Sichuan 338.30 0.08 0.49[0.62] H(50) = 0.72 Q(24,19)= 24.01 0.28[0.59] 0.47[0.49] 0.11[0.74] 0.02[0.86] 0.40[0.52] 0.00[0.92]
Yunnan 305.17 0.10 0.93[0.34] H(49) = 0.89 Q(24,19)= 25.01 0.00[0.96] 1.38[0.23] 0.05[0.80] 0.68[0.40] 0.37[0.54] 1.12[0.28]
Xinjiang 309.59 0.09 0.85[0.39] H(49) = 0.58 Q(24,19)= 20.49 0.58[0.44] 0.03[0.86] 0.59[0.44] 1.48[0.22] 0.00[0.99] 2.88[0.08]
Note: see main text in section 2 for further details.

[40]
 Table A2: Specification Tests, electricity production with dummies.
Residuals Level Residuals Irregular Residuals
Log Likelihood Standard Error Normality Heterocedasticity Q-test Skewness Kurtosis Skewness Kurtosis Skewness Kurtosis
Beijing 378.82 0.05 0.75[0.44] H(48) = 1.42 Q(24,19)= 36.02 0.00[0.98] 1.22[0.26] 0.22[0.63] 0.28[0.59] 0.09[0.75] 2.38[0.19]
Fujian 432.42 0.05 1.86[0.06] H(51) = 0.97 Q(24,19)= 23.82 1.66[0.19] 0.09[0.76] 3.24[0.07] 0.19[0.65] 0.64[0.42] 0.27[0.59]
Guangdong 418.48 0.04 1.00[0.31] H(49) = 1.19 Q(24,19)= 19.25 0.87[0.34] 0.00[0.97] 6.53[0.01] 0.20[0.64] 0.30[0.57] 0.14[0.70]
Guangxi 396.94 0.06 0.10[0.91] H(52) = 0.65 Q(24,19)= 15.19 0.08[0.77] 0.21[0.64] 0.59[0.44] 0.02[0.87] 1.68[0.19] 0.30[0.58]
Hainan 430.84 0.05 1.46[0.14] H(53) = 0.61 Q(24,19)= 18.96 1.16[0.28] 0.10[0.74] 1.48[0.22] 0.70[0.40] 0.50[0.47] 0.08[0.77]
Hebei 452.99 0.04 0.69[0.48] H(52) = 1.09 Q(24,19)= 30.45 0.08[0.77] 0.11[0.73] 3.63[0.05] 1.50[0.22] 0.42[0.51] 1.20[0.27]
Jiangsu 449.03 0.03 1.29[0.19] H(50) = 1.32 Q(24,19)= 26.22 1.16[0.28] 0.00[0.92] 2.29[0.13] 0.00[0.92] 1.13[0.28] 0.05[0.81]
Liaoning 445.30 0.05 0.74[0.45] H(54) = 1.88 Q(24,19)= 16.48 0.13[0.71] 0.12[0.72] 3.76[0.05] 0.51[0.47] 0.10[0.74] 0.02[0.88]
Shanghai 423.08 0.05 0.63[0.52] H(53) = 1.78 Q(24,19)= 28.43 0.51[0.47] 0.00[0.97] 0.00[0.93] 0.07[0.78] 0.08[0.76] 0.09[0.75]
Shandong 472.33 0.03 0.96[0.33] H(50) = 1.47 Q(24,19)= 18.08 0.15[0.69] 1.18[0.27] 0.38[0.53] 2.08[0.14] 0.61[0.43] 0.76[0.38]
Tianjin 455.40 0.06 0.34[0.73] H(50) = 0.83 Q(24,19)= 17.84 0.29[0.58] 0.20[0.58] 0.10[0.74] 5.48[0.01] 1.46[0.22] 1.29[0.25]
Zhejiang 417.65 0.04 2.06[0.01] H(49) = 1.01 Q(24,19)= 20.94 0.06[0.79] 0.88[0.35] 1.47[0.22] 0.36[0.54] 0.77[0.37] 0.49[0.48]
Anhui 422.04 0.05 1.83[0.06] H(52) = 1.28 Q(24,19)= 12.14 0.71[0.39] 1.11[0.29] 0.78[0.37] 2.34[0.12] 0.46[0.49] 0.31[0.57]
Heilongjiang 431.30 0.05 0.70[0.48] H(53) = 1.55 Q(24,19)= 32.53 0.13[0.71] 0.10[0.74] 0.22[0.63] 0.88[0.34] 0.20[0.75] 4.92[0.02]
Henan 461.38 0.03 0.30[0.76] H(51) = 0.82 Q(24,19)= 32.28 0.26[0.60 0.04[0.83] 3.18[0.07] 1.52[0.21] 0.12[0.72] 0.13[0.70]
Hubei 380.54 0.07 0.86[0.38] H(52) = 1.05 Q(24,19)= 25.52 0.55[0.45] 0.47[0.49] 0.76[0.38] 0.00[0.35] 0.21[0.64] 0.58[0.44]
Hunan 381.74 0.06 0.04[0.96] H(52) = 0.85 Q(24,19)= 28.62 0.03[0.84] 0.18[0.66] 0.34[0.55] 2.23[0.13] 1.15[0.28] 0.51[0.47]
Inner Mongolia 411.26 0.06 1.22[0.22] H(53) = 0.81 Q(24,19)=14.55 0.55[0.45] 0.22[0.63] 0.70[0.40] 0.00[0.95] 0.86[0.35] 0.00[0.96]
Jiangxi 383.12 0.07 0.69[0.48] H(52) = 1.49 Q(24,19)= 19.56 0.17[0.67] 0.08[0.76] 0.03[0.85] 0.47[0.49] 1.68[0.19] 0.05[0.82]
Jilin 396.15 0.05 0.70[0.42] H(50) = 1.11 Q(24,19)= 31.07 1.21[0.26] 0.13[0.71] 0.38[0.53] 2.02[0.15] 0.83[0.36] 0.26[0.70]
Shanxi 474.05 0.04 1.24[0.21] H(53) = 0.85 Q(24,19)= 32.92 0.60[0.43] 0.78[0.37] 1.82[0.17] 1.59[0.20] 0.00[0.95] 0.87[0.35]
Chongqing 330.20 0.08 1.68[0.09] H(49) = 0.86 Q(24,19)= 32.89 1.58[0.20] 0.00[0.99] 0.42[0.51] 1.20[0.27] 0.01[0.91] 0.92[0.33]
Gansu 332.14 0.09 1.67[0.09] H(51) = 0.63 Q(24,19)= 19.93 0.08[0.77] 0.64[0.42] 2.53[0.11] 0.05[0.81] 0.82[0.36] 3.35[0.06]
Guizhou 386.54 0.06 0.21[0.41] H(50) = 1.65 Q(24,19)= 34.94 0.00[0.95] 0.00[0.94] 0.12[0.72] 0.08[0.76] 0.58[0.52] 0.03[0.84]
Ningxia 390.65 0.06 1.05[029] H(52) = 1.01 Q(24,19)= 13.26 0.06[0.80] 0.29[0.59] 0.52[0.46] 0.18[0.66] 0.08[0.77] 043[0.50]
Qinghai 288.24 0.11 1.31[0.18] H(50) = 0.63 Q(24,19)= 16.03 1.16[0.18] 0.11[0.73] 0.19[0.66] 2.10[0.14] 3.13[0.07] 0.29[0.58]
Shaanxi 403.04 0.06 1.59[0.11] H(53) = 1.13 Q(24,19)= 22.57 1.91[0.16] 0.07[0.78] 0.21[0.64] 0.50[0.47] 1.69[0.19] 0.11[0.73]
Sichuan 384.27 0.06 0.90[0.36] H(51) = 0.72 Q(24,19)= 31.14 0.53[0.46] 0.06[0.79] 0.01[0.90] 0.63[0.42] 0.63[0.42] 0.23[0.63]
Yunnan 367.91 0.07 0.07[0.47] H(52) = 1.30 Q(24,19)= 36.15 0.01[0.87] 0.02[0.86] 1.32[0.25] 4.17[0.04] 0.59[0.43] 5.78[0.01]
Xinjiang 441.77 0.04 0.69[0.24] H(51) = 1.16 Q(24,19)= 33.49 0.62[0.42] 0.01[0.90] 0.08[0.77] 0.54[0.46] 0.38[0.56] 0.61[0.43]
Note: See main text in section 2 for further details.

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