Financial Implication of Electricity Use and Distributional Losses on Industrial and Economic Performance in Ghana

Abstract

The purpose of the study was to examine the relationship among electricity consumption, distributional losses, service value added and GDP per capita growth rate in Ghana. The analysis of the study consider the effects of electricity from both industrial and national level using service value added and GDP per capita growth rate. The study used time series for the period of 1984 to 2018 on the economy of Ghana. The study used time series for the period of 1988 to 2018 on the economy of Ghana. The quantitative research approach was followed for the analysis which allows for series of hypothesis on the relationship among the variables to be tested. The Auto-Regressive Distributed Lag (ARDL) model was followed to test the various electricity consumption-economic growth hypotheses as explained in the literature review. The results indicated a negative simultaneous relationship between per capita electricity consumption and GDP per capita growth rate in Ghana. That is, electricity consumption and GDP per capital growth rate explain each other in the Ghanaian context. The results observed an expected negative relationship between electricity distributional losses and GDP per capita growth rate. That is, reducing distribution losses could increase GDP per capita income of Ghana. The Distribution companies must invest into modern technologies to reduce distributional loses since the overall effects of reducing distributional loses shall be positive on both industries and economic performance. The metering department of the distribution companies must ensure proper metering regulation and reduce the number of companies that are located in house who are using residential rate for commercial purposes.