Drivers of Energy Consumption in Ghana: A Sectoral Decomposition Analysis of Energy Supply and Demand Drivers

Abstract

Energy plays a crucial role in determining Ghana's socioeconomic growth. The rapid growth of demand and the increasing complexities of energy supply in Ghana pose a significant challenge to Ghana’s efforts to a universal energy access. This thesis is aimed at assessing the drivers of energy consumption in Ghana using a sectorial decomposition of energy demand and supply drivers. It applies the additive Logarithmic Mean Divisia Index (LMDI) to decompose drivers of Ghana's energy consumption between 2000-2020. Activity effect, efficiency, effect, and intensity effect were used to quantify changes in PEC. Changes in FEC were assessed by quantifying the contributions from three different factors: activity effect, structure effect, and intensity effect. The results show that the activity effect and the efficiency effect led to an increase in PEC while the intensity effect led to a decline in PEC. Similarly, FEC increased significantly throughout the period with the activity effect being the major contributor to the increase in consumption. The structure and intensity largely contributed to a drop in final energy consumption. Within the residential sector, the growth of population and the proportion of the population with access to electricity, clean fuels, and those who use traditional biomass were the dominant factors driving FEC while technological improvement in energy intensity was an inhibiting factor to consumption growth. In the industrial sector, the activity effect contributed to FEC growth while structure and intensity effects were inhibitors to consumption growth. The results of this study will help the government to reduce energy consumption by encouraging industrial restructuring and enforcing energy-efficiency and energy-saving policies.