Exploring the Macroeconomic Impacts of Low-Carbon Energy Transitions: A Simulation Analysis for Kenya and Ghana

Dirk Willenbockel,Helen Hoka Osiolo,Simon Bawakyillenuo

doi:10.19088/1968-2017.163

Abstract

The study applies purpose-built dynamic computable general equilibrium models for Kenya and Ghana with a disaggregated country‑specific representation of the power sector, to simulate the prospective medium-run growth and distributional implications associated with a shift towards a higher share of renewables in the power mix, up to 2025. In both countries, the share of fossil fuel-based thermal electricity generation in the power mix will increase sharply over the next decade and beyond according to current national energy sector development plans. The overarching general message suggested by the simulation results is that in both countries it appears feasible to reduce the carbon content of electricity generation significantly without adverse consequences for economic growth and without noteworthy distributional effects.

Highlights

1 Introduction This study provides a forward-looking simulation analysis of economy‐wide and distributional implications associated with alternative pathways for the development of the electricity sector in Kenya and Ghana
We employ purpose-built dynamic computable general equilibrium (CGE) models for Kenya and Ghana with a detailed country-specific representation of the power sector to simulate the prospective medium‐run growth and distributional implications associated with a shift towards a higher share of renewables in the power mix, up to 2025
The dynamic macroeconomic adjustment process in this scenario is complicated by the fact that the baseline hydro-thermal generation cost differential endogenously generated by the CGE model has a humpshaped time profile as shown in Figure 6: over the period 2015–17, the thermal generation costs drop sharply relative to hydro unit costs, so that by 2017 the initial cost advantage of hydro turns into cost disadvantage

Summary

Introduction

Significant shifts in the power mix of an economy, as well as policy measures to induce or support such shifts, are bound to affect the structure of domestic prices across the whole economy with repercussions for the growth prospects of different production sectors and for the real income growth paths of different socioeconomic groups. Understanding these economy-wide repercussions is crucial for a study concerned with the obstacles to – and political feasibility of – adopting a low-carbon growth strategy.

Objectives

Methods

Results

Conclusion