Demand-side management in Ghana: The energy efficiency challenge

Demand-side management in Ghana: The energy efficiency challenge
Source: David A Alemzero | Msc.Economics | Energy and natural resource economics | Bsc Marketing
Date: 11-05-2018 Time: 12:05:44:am

Energy is very important in the life of any nation and plays a significant role towards its economic growth and development. This resource needs to be managed properly to ensure its all-time availability to the end user, hence the need for energy efficiency programs. Energy Efficiency has been pursued by many nations both industrialized and non-industrialized nations alike. It has been in practised since the 1970s energy crises.

Energy intensity - a measure of the energy efficiency of a nation's economy, calculated as units of energy per unit of GDP. It is an indication of how much energy is used to produce one unit of economic output. As of 2014, energy intensity for Ghana was 4 MJ per dollar of GDP. A lower ratio indicates lesser energy is being used in.

Energy efficiency (EE) policies have also been promoted to reduce air pollution from pollutants such as sulfur dioxide, nitrogen oxides, ozone and particulate matter, to improve energy security and to prevent the need for constructing increasingly expensive new power plants. The World Energy Outlook 2009 (International Energy Agency, 2009) and several other studies (Creyts et al., 2007; Granade et al., 2009; Naucl´ er and Enkvist, 2009) highlight the huge potential of CO2 reductions from increased end-use energy efficiency. In view of these advantages of energy efficiency, policy instruments that promote the increase in energy efficiency play an important role. Apart from its impact on greenhouse gas emissions, the literature on energy efficiency argues that promoting energy efficiency costs less than building new power plants. There are also environmental reasons.

Ghana has been experiencing power fluctuations for past three years due to low generation and inadequate money to buy new equipment to replace the old ones which are not functioning properly. As a result energy efficiency programs have has been vigorously pursued by the Energy Commission of Ghana. In view of this, energy efficiency is very important in meeting the energy demands of the country. Reducing electricity demand also reduces the need to upgrade the transmission and distribution network. Lastly, reducing peak demand combined with reducing energy demand can lead to grid reliability.

Promoting energy efficiency is a part of demand-side management efforts that are often undertaken by utilities and the government. Demand-side management (DSM) refers to the “planning, implementing, and monitoring activities of electric utilities that are designed to encourage consumers to modify patterns of electricity usage, including the timing and level of electricity demand” (Energy Information Administration, 1999). It is estimated that the world spends about €231 billion yearly on investments for energy efficiency. In order for the world to reap the benefits of EE, it has to invest four times of that amount

The original intention of DSM programs was to change the pattern of electricity demand faced the utility companies. It was subsequently modified to take into account the programs undertaken by utilities to promote energy efficiency. DSM, therefore, incorporates energy efficiency, energy conservation, and load management (Carley, 2012).

There are various ways in which utilities and federal and local governments have carried out these objectives. They include, among other things, policies like appliance standards, financial incentive programs, information campaigns and voluntary programs (Gillingham et al., 2006).

While there is a substantial literature on the development of DSM in developed countries, there is a lack of a systematic analysis of DSM efforts in Ghana given the importance accorded to energy efficiency in Energy Strategy to 2050.

While this an abundant empirical literature about Demand Side Management issues in developed countries like the US and others that of Ghana. Early analyses concentrated on estimating its cost-effectiveness measured in terms of the cost of kWh saved compared to the cost of producing it. For example, Joskow and Marron (1992) and Eto et al. (1996) find that these programs were both cost-effective and also effective in reducing energy consumption. There are also several other qualitative studies that show that DSM programs are cost-effective (Eto et al., 2000; Nadel, 1992; Nadel and Geller, 1996). The first empirical analyses attempt to measure the accuracy of self-reported DSM savings of the utilities and draw conclusions on the effectiveness of DSM programs. Dulleck and Kaufmann (2004) focus on information programs in Ireland and find that while the short-run demand behaviour does not change significantly, the long-run demand changes by a great amount. They conclude that information programs reduce electricity demand by around 7%. Another DSM study has been done in Canada by Rivers and Jaccard (2011).  Rivers and Jaccard (2011) apply a partial adjustment model with bias-corrected estimators, based on Kiviet (1995), and conclude that DSM expenditure has only a marginal effect on electricity consumption in Canada

According to the energy commission, Ghana has not had any DSM Policy until 2006 thereabout where the commission started with energy efficiency and energy conservation programs. The commission has now banned slightly used refrigerators and electrical appliance being imported to the country in a bit to conserve and save energy. They have also done media communication on off-peak and on-peak consumption by switching off all electrical gadgets. Are these yielding results in Ghana?

The Ghanaian power sector is bedevilled with problems ranging from finances and management to other efficiencies. Thus, the government in agreement with the US government as part of the Millennium Compact II agreement agreed to privatize the sector to bring efficiency to the power sector. Independent Power Producers (IPPs) have begun to enter the electricity generation market,  previously dominated the public sector. Do all these inefficiencies contribute to the failure of the sector to deliver good power supply to the customer? Yes, I think so. I have no doubt that as the power sector is being privatized to allow for private sector participation in the distribution of the power, it would inure to the benefit of the country. Energy has a direct correlation of economic growth. If the power sector is fixed, it would attract direct foreign investment that would propel economic growth and development. Ghana is among the few countries in Africa, with national electricity coverage beyond 50% on the continent.

There are about 1.1 billion people globally that lack access to electricity. This is calls for energy efficiency, energy access as well as energy economy. There is the need to develop mini off-grid to serve these people who live in the remote parts of the world and rely on dirty fuel such as kerosene to power to their households. More so, these people use their meagre household incomes to buy kerosene to produce power leaving them poor.

Over two-thirds of EE potential has not been touched. This sector has the potential to create millions of jobs locally and the world. In the construction sector for instance, 80% of EE potential has not been explored, public building renovation in the EU alone, represents a €120 billion market over the 2017-2020 period

An Article published by the World Economic Forum, suggests that Blockchain technology could be the solution to energy efficiency in. The blockchain is a distributed, digital transaction technology that permits the secure execution of smart contracts over peer-to-peer networks independently from a central authority such as banks, trading platforms or energy companies/utilities. Other participants in the network act as witnesses to each transaction carried out between a provider and a customer; these are stored permanently on a digital ledger - the blockchain - which is duplicated by every computer on the network.

Blockchain technology application in energy is seen in the following light, it serves as a smart transaction platform at a systematic level that gives rise to true 'prosumers': as well as consumers, households also become producers and sellers of energy with a high degree of autonomy. Utilities and grid operators become more efficient by being able to balance supply and demand in real-time by engaging these prosumers directly. It supports renewable energy integration into the grid in a cost-effective fashion.

In New York, a small energy company together with a technology company have developed a microgrid project in which neighbours can buy and sell solar power from each other on a blockchain platform called ‘TransActive Grid’ that documents all transactions. I hope we could replicate this in Ghana in the future to ensure energy efficiency and consumer satisfaction.

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