Modelling aggregate domestic electricity demand in Ghana: An autoregressive distributed lag bounds cointegration approach

In spite of the varying supply boosting efforts made by various governments to deal with the existing demand–supply gap in the electricity sector, the incessant growth in aggregate domestic electricity demand has made these efforts futile. As an objective, this paper attempts to identify the factors responsible for the historical growth trends in aggregate domestic electricity demand quantifying their effects both in the short-run and long-run periods using the ARDL Bounds cointegration approach and the sample period 1975 to 2005. In the long-run, real per capita GDP, industry efficiency, structural changes in the economy, and degree of urbanisation are identified as the main driving force behind the historical growth trend in aggregate domestic electricity demand. However, in the short-run, real per capita GDP, industry efficiency, and degree of urbanisation are the main drivers of aggregate domestic electricity demand. Industry efficiency is the only factor that drives aggregate domestic electricity demand downwards. However, the negative efficiency effect is insufficient to have outweighed the positive income, output, and demographic effects, hence the continual growth in aggregate domestic electricity demand. As a policy option, we recommend that appropriate electricity efficiency standards be implemented at the industry level.

► Real per capita GDP is the primary determinant of electricity demand both in the short and long-run.
► Industrial efficiency, structural changes and urbanisation rate play secondary role.
► The positive income, output, and demographic effects outweigh the negative efficiency effects.