Energy Demand In Ghana: A Case Study Of The Electricity Subsector

In spite of the policy relevance associated with identifying the factors that affect electricity demand and quantifying their effects, there is still a dearth of research analysing aggregate electricity demand in developing countries. Even with the few studies that exist in the literature, the focal countries have been in Asia and the Middle East leaving a gap for Sub-Saharan Africa and Ghana in particular. In Ghana, efforts have been made (see Constantine et al, 1999 & Buskirk et al, 2006) to fill this gap. However, the focus of these studies has been on the household sector. The main focus of this work is, therefore, to forecast domestic electricity consumption specifically identifying what factors affect aggregate domestic consumption and assessing their impact using the ARDL Bounds Cointegration from 1975 to 2008. Also using data on Ghana I test the energy (electricity) conservation hypothesis using the Toda and Yomamoto Granger Causality test. The Bounds cointegration test shows evidence of a long-run equilibrium relationship implying that real per capita GDP, industrial efficiency, structural changes, and degree of urbanisation can be treated as the "longrun forcing variables" explaining total domestic electricity consumption. In the longrun, real per capita GDP, industrial efficiency, degree of urbanisation, and structural changes in the economy were found to be the main determinants of aggregate domestic electricity demand in Ghana while in the short-run all factors with the exception of structural changes in the economy were found to significantly impact on electricity demand. Aggregate domestic electricity demand is predicted to increase from 7,324 GWh in 2009 to 21,974 GWh in 2019 which represents an annual average growth rate of 11.8 percent. Based on the projected growth in electricity consumption, the total required plant capacity increase is projected to be 1,419 MW which represents an increase of 60% above the 2010 figure. This result implies that thermal generation as a percentage of total installed capacity is predicted to increase from the current 40% to 58% by 2019. Also I found evidence in support of the energy (electricity) conservation hypothesis for Ghana. The result shows that only industrial efficiency drives electricity consumption downwards. Based on this I suggest the development and intensification of the countrya€Ÿs energy efficiency programs. Specifically proprietary electricity efficiency technologies and processes that have significant electricity-savings potential should be identified systematically. Also options should be provided to facilitate the deployment of such technologies in the industrial sector