Effects of Energy Transition on Electricity Tariffs in Ghana

Abstract

The study examined the impact of energy transition and electricity tariffs in Ghana. Annual time series data from 1985 to 2021 were used for analysis. The research utilized the ARDL methodology to establish the short-term and long-term relationships among variables. To ensure that the variables were stationary within the context ARDL, a cointegration test was conducted. Additionally, a post-estimation test was performed to assess the model's robustness and stability. Based on the ARDL results, both electricity production from fossil fuels and electricity production from renewables were found to have a positive and significant impact on electricity tariffs in the short and long term. The cost of energy transition was found to have a positive effect on tariffs in the short run but a negative effect in the long run. Carbon emissions were found to positively influence tariffs in the long run and the short run. However, carbon emissions decreased significantly in the long run, leading to a decline in electricity tariffs. Considering these findings, the following recommendations are proposed: Ghana should prioritize and support funding for renewable energy projects, establish a favorable regulatory framework, and maintain policies that encourage the transition from fossil fuels to renewable energy sources. The government should also encourage public-private partnerships to share the risks and costs associated with renewable energy projects. Lastly, strong environmental regulations should be implemented and enforced to reduce the carbon intensity of the energy sector.