ABSTRACT
Electricity use has become a necessary and key input and an
engine for growth for most economies in the world. In this era of
industrialization, the quantity of electricity consumed in a country has been
linked closely with economic structure and the level of population growth. This
study investigates the effect of population growth and electricity intensity on
electricity consumption in Ghana. The study employed two methods to
individually assess the impact of population growth and energy intensity on
electricity consumption on one hand and the sector effect of electricity
intensity on electricity consumption on the other hand. Vector autoregressive
(VAR) model was employed to ascertain the impact of Ghana’s growing population
and energy intensity on electricity consumption using time series data from
1980 - 2015. Findings of the model reveal that population growth has a positive
significant impact on electricity consumption whiles intensity has a
significant negative effect on electricity consumption. The decomposition
analysis also revealed that intensity impacts negatively on electricity
consumption. The study further revealed that activity effect is the major
contributor of electricity consumption. The study therefore recommends more
rigorous energy conservation policies and that policies on efficient gadget use
should be enforced to avoid energy loses. Also, it further recommends that
households should be encouraged to use renewable energy as supplement, so as to
cut back intensity on the national grid.
CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Energy is the lifeblood of the
global economic setup; a necessary input to the production of virtually all
modern day economic goods and services. It cannot be over-emphasized how
significant energy or power is to the economy of any country. It manifests itself
through key segments of the economy such as manufacturing, transport, education
and mining which rely heavily on power supply to aid their proper functioning
(Ackah et al, 2014). Energy is one among the major indicators of any country.
It is the core factor for fiscal development of any country (Batliwana and
Reddy, 1993). It is undoubtedly an engine of growth to the economies of the
world and energy consumption tends to grow alongside with gross domestic
product (GDP). Global energy consumption rose by 0.59 percent each year on
average for every growth in percentage point of GDP between the years 1980 and
2008 (World Energy Outlook, 2010).
Electricity consumption has been
used as an index for measuring the development of a particular region, country,
and economy (Stern and Cleveland, 2004). The impact of energy use in an economy
manifests through the major roles energy plays in servicing the various sectors
of the economy. The Energy Information Administration (EIA) data (2012),
reports that the industrial sector consumes about 51.7% of the total world
energy followed by transport sector consuming about 26.6%. In Ghana however,
the transport and industrial sectors alone consumes 14 and 20 percent of the
total primary energy respectively. The rest of the 66 percent is consumed by
other sectors including losses. A greater percentage of high consumption in the
country is attributed to residential customers which resulted in unprecedented
peak demand of 1423MW (Dramani, 2014).
In this era of industrialization,
the quantity of electricity consumed in a country has been linked closely with
the level of population growth. Population growth is central and a crucial
determinant of electricity demand in terms of the quantity consumed in the
sense that, as population increases, more electrical gadgets are acquired by
the growing population and causing electricity consumption to rise. Also, a
growing population means demand for general goods and services would increase.
Industries are therefore compelled to consume more electricity so as to
increase production to satisfy the rising demand.
Population and income are
considered the key drivers of growing demand for electricity. The World Energy
Outlook, (2016) projects that World population will reach 8.8 billion people by
2035. Rapid population growth does not only affect the current energy demand,
but also has an implication on the future rate of energy consumption. Data from
IEA/World Bank from the years 1990 to 2008 shows that, on the average, the per capita
energy consumption increased by 10% while the world population increased by
27%. The world is estimated to increase its energy consumption from about 9000
million tonnes of oil equivalent (Mtoe), to between 15000 and 21,000 Mtoe when
the population of the world reaches 12 billion people in the 22nd century
(Sheffield, 1998). The IEA (2007), projects that, developing countries will
experience a greater increase in energy consumption where the proportion of
global consumption is expected to rise from 46 to 56 percent between 2004 and
2030. This can be attributed to the fact that developing countries are yet
experiencing rapid population growth at the same time industrialization and
other developing sectors requiring energy for goods production. For instance,
China and India are highly populated countries and at the same time among the
highest energy consumers of the world (Shashidan et al, 2013). According to UN
(2014), the overall increase in world population will take place in urban centers as
population in rural areas is expected to decline in most of the regions with
notable exception of Africa.
Energy intensity is a measurement
of the amount of energy that a country needs to generate for the production of
a unit of GDP. Energy demand tends to be low where the income per capita is
higher, because those economies would have switched from industrialization to
more services and efficiency enhanced. Emerging economies on the other hand
tend to have high energy consumption per capita as a result of growing GDP per
capita. According to IEA, (2014) energy intensity has been declining for the
past 22 years in many countries across the world and this has been attributed
to faster growth in GDP than energy demand, the services sector taking center
stage of the economy with energy efficiency programmes rolled out.
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