Elsevier

Renewable Energy

Volume 134, April 2019, Pages 1114-1128
Renewable Energy

Electricity supply in Ghana: The implications of climate-induced distortions in the water-energy equilibrium and system losses

https://doi.org/10.1016/j.renene.2018.09.025Get rights and content

Highlights

  • Distortions in the water-energy equilibrium decreases electricity availability.

  • Storage renewable hydro should be developed in the future.

  • System losses have a concave effect on electricity supply with a tolerable rate of 6.65%.

  • Higher economic growth is compatible with the SE4ALL and energy security goals.

  • Recorded inefficiencies in electricity production is persistent.

Abstract

An important synergy exists between electricity supply security and sustainable economic development. However, distortions in the water-energy equilibrium (especially for electricity systems that heavily depend on hydropower renewable energy) and operational inefficiency in the transmission and distribution networks can affect electricity supply negatively and distort this synergy. Given the irreversible nature of capital investments and the time-dependent nature of learning abilities and information flow, it is critical to delineate the short- and long-run effects of system losses and distortions in the water-energy equilibrium on electricity availability. This study applies an econometric approach to study the case of Ghana from 1970 to 2016. Distortions in the water-energy equilibrium negatively affect electricity supply in the short- and long-run. Investment in storage renewable hydro will ensure operational flexibility and compensate for the variability in water flow. Moreover, storage hydropower is a vital asset for the development of non-flexible renewables (i.e. wind and solar) due to the synergy that exists between them. System losses have a concave effect on electricity supply, with the tolerable rate determined as 6.65%. Current levels suggest that the country should cut down on system losses by 13.35%; this requires a significant investment in transmission and distribution networks and meters.

Introduction

Electricity supply and economic growth are closely connected [1]. Therefore, ensuring an uninterrupted supply of electricity is a prerequisite for a nation's sustainable economic growth and development. Globally, hydropower provides about 15% of electricity generation [2], supplies about 71% of renewable electricity [3], and represents about 85% of renewable energy [4]. In most economies, the technology supports more than 50% of the total electricity generated [5]. In Africa, in particular, hydropower generation constitutes 84% of all non-fossil fuel energy use [3]. Among experts, it is believed that large dams can help alleviate Africa from its energy supply insecurity issues. Compared to thermal-based generating sources, hydropower technology provides the least-cost alternative of generating power, and it is environmentally friendly [6]. Moreover, carbon dioxide emissions from the entire lifecycle of construction, operation and decommissioning are far lower than all other renewable technologies. Thus, in terms of addressing the electricity supply security issue while ensuring minimal carbon emissions, hydropower technology leapfrogs other generating technologies. However, because hydropower drives on the power of water, adverse changes in the climate that alter the flow of water distorts the water-energy equilibrium, which poses the risk of exacerbating the problems of electricity supply insecurity.

In addition to the significance of generation technology to energy supply security, achieving operational efficiency in the areas of transmission and distribution also plays a significant role. While developed economies have made significant strife in improving the operational efficiency of electricity generation, developing regions like Africa continue to experience inefficiency in transmission and distribution networks. Consequently, for example, distribution losses as a percent of total electricity generation are in excess of 20%. From the level of 11.9% in 2005, the rate has increased to 21.1% in 2014 [7].

The implications of climate change and rising system losses have been examined in the literature. Greenleaf et al. [8] examined the effect of climate change policy on energy security in the European Union. They found that extreme weather conditions can temporarily restrain energy infrastructures and consequently energy supply. Van Rheenen et al. [9] examined the impact of climate change on hydropower supply in the central valley and Lake Shasta of Poland. The result showed that hydropower could decrease by 8–11% in Lake Shasta and by 10–12% in the central valley as a whole due to climate change. In the Nordic region, Beldring et al. [10] revealed, based on a simulation model, that, there will be a general increase in river flow and hydropower supply, but the variable winter climate is expected to increase the frequency and fast inflows that may challenge the reservoir capacity of dams. Barnett et al. [11] reported that climate change will reduce hydropower based on the Colorado River by 49% by the middle of the century. Demers and Roy [12] also found that, in the province of Quebec, while water inflows increased, the summer inflows decreased due to climate change. Gaudard et al. [5] investigated the effect of water seasonality and price changes on future revenue distribution and its related uncertainty. They found that the impact of climate change on streamflow will decrease the revenue by 20%. Also, variability in electricity prices increases the uncertainty in revenue. In Africa, few studies have investigated the implications of climate change on energy generation. A report by the Building Nigeria's Response to Climate Change (BNRCC) [13] asserted that climate change will most certainly impact negatively the already limited power supply via its impact on a hydro and thermal generation. Enete and Alaba [14] confirmed that climate change undermines power and energy generation in Nigeria. Zwaan et al. [15] evaluated the prospects of large-scale hydropower development in Ethiopia under different scenarios. Their result showed that there is a high projection for future deployment of hydropower generation notwithstanding the hydrological effects from climate change, domestic water use and irrigated agriculture water demand expansions. However, climate change can impose an important limitation on water use for other purposes, and this might reduce the potential deployment of the hydropower plant. Climate change will cause a decrease of 800 GWh of hydropower electricity generation in 2030 and further to 1200 GWh in 2050. Kwakwa [16] examined the drivers of hydropower generation in Ghana in the long-run. Their result showed a negative impact of environmental degradation on hydropower generation. While the above studies acknowledge the implications of the distortions in the water-energy equilibrium caused by climate change on electricity supply, they provide no clear statistical association either in the long-run or short-run between distortions in the water-energy equilibrium and electricity supply. Given that information flow and learning capabilities differ between the long-run and short-run, it is important to disassociate the short-term and long-term effects of distortions in water-energy equilibrium on electricity supply.

Other studies have instead examined the relationship between system losses and electricity supply. Sihombing [17] investigated the effect of energy losses on electricity supply in North Sumatra Indonesia and found a negative effect. Nababan [18] also confirmed the negative effect of energy losses on electricity supply. Opeyemi et al. [19] and Iwayemi [20] both examined the effect of system losses on electricity supply and confirmed a negative relationship. These studies assumed a linear relationship between energy supply and system losses. This may not depict the reality since, engineering-wise, it may not be possible to totally get rid of system losses, but an acceptable level that does not deteriorate electricity generation is still attainable. Though one may be tempted to use the levels in developed countries as a benchmark, the differences in system operating conditions suggest that the acceptable levels of system losses for production may differ from country to country. Thus, by assuming linearity in the relationship, it is impossible to determine the threshold (referred to in this study as “red line in system losses”) which will provide the benchmark for evaluating a country's performance in terms of lowering the losses in the system.

The different strand of the literature has treated the implications of system losses and distortions in the water-energy equilibrium on electricity supply in isolation. This from an econometric point of view can be problematic since the omission of an important variable in a statistical relationship may lead to the wrong representation of the true impact of both system losses and distortions in water-energy equilibrium on electricity supply. The main aim of this study is to provide an econometric investigation into the short- and long-run marginal effect of system losses and distortions in the water-energy equilibrium, using the case of Ghana. This study makes the following contributions to the literature. It provides the first econometric evaluation of the short- and long-run marginal effects of both the distortions in the water-energy equilibrium and system losses on electricity supply in Africa. The paper uses the variability in hydropower source to proxy the climate-induced distortions in the water-energy equilibrium. Climate change is the major source of the variability in the water levels of the dam. Second, the study allows for non-linearity in energy supply – system losses relationship. In other words, it determines the cut-off point in system losses below which energy availability would not be distorted. This is then tested against a linear relationship model to determine which one best describes the data. The determination of the cut-off point provides the benchmark to evaluate performance in terms of lowering system losses.

Ghana owns one of the largest hydropower plant capacity in Africa and hosts 76 feasible small- and medium-sized hydro sites, which have a potential capacity of about 800 MW of power [21]. In the electricity sector, hydropower technology contributes more than 60% of the total electricity generation, which supports economies like Togo, Benin, Burkina Faso, and Cote d'Ivoire, and constitute about 90% of renewable energy. Like most economies in Africa, hydropower technology will remain an important generation source in Ghana's electricity sector for a longer time to come. Given the symmetry that exists in the weather patterns especially in the western part of Africa, the findings based on the data of Ghana will provide useful policy guidance (on the type of renewable hydro plant to develop) for the electricity sector in these economies to enhance electricity supply security.

Section 2 presents the theoretical and empirical specifications and discusses the data. Section 3 provides an overview of the electricity sector. Section 4 discusses the main findings of the study. Section 5 concludes the paper and makes policy recommendations.

Section snippets

Method and data

This section of the paper describes the theoretical and empirical models, the econometric method, and the data used in this study.

Overview of the electricity sector in Ghana

This section discusses the structure of the electricity generation mix, the trends in the water levels of the Akosombo dam, electricity price, and renewable energy development in the electricity sector.

Results and discussion

This section presents and discusses the main findings of the study. It begins with a preliminary test of the data and then proceeds to discuss the main findings of the study.

Conclusion and policy recommendation

This study investigated the supply-side of the electricity sector in Ghana. Specifically, this article examined the effect of system losses and distortions in the water-energy equilibrium (proxy by variability in hydropower energy sources) on electricity supply. The study applied the ARDL method since the supply of electricity involves irreversible investment decisions, which introduces dynamism into the sector. Preliminary analyses of the data revealed evidence of a long-run relationship. The

Acknowledgement

This article benefited from the useful comments of two anonymous reviewers and the editor. The usual disclaimer applies.

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