Electricity power production, transmission and distribution losses in Ghana: the role of regulatory quality

Abstract

ABSTRACT Ghana faces annual productivity losses of $320–$924 million due to electricity crises, impacting GDP by 2%-6% and stifling economic growth with over 5% power losses. The study, therefore, utilized time series data to explore the relationship between electricity production, transmission, and distribution losses in Ghana from 1983–2018, specifically focusing on the role of regulatory quality in this relationship. Using statistical tests like Philip-Perron and Augmented Dickey-Fuller, the study confirmed cointegration among the variables. The Autoregressive Distributed Lag model was then employed, analyzing data from 1983 to 2018. The research compared a base model with variables affecting electricity losses to an extended model that incorporated Institutions and their interaction with electricity production. The study reveals that improving regulatory quality and institutional strength significantly reduces electricity losses in Ghana, highlighting the need for strategic policies to enhance efficiency and reliability in the electricity sector. Results also showed that the labor force had a positive impact on losses, while economic growth and electricity production had a negative effect. Foreign direct investment and gross fixed capital formation were not significant. The study’s short-term findings confirmed these relationships. The inclusion of Institutions maintained similar signs and significance in variables except for foreign direct investment. The study recommends enhancing institutional quality, attracting more FDI into the energy sector, and implementing targeted measures to manage the labor force’s impact on electricity demand and losses.