The Effect of Electricity Technical Losses on Ghana's Economy: A Simulation Evaluation

Abstract

This study investigates the effects of electricity distribution inefficiencies in Ghana's electricity sector on output, consumption and investments. Inefficiencies are considered as losses in transmission and distribution channels from the generator to the final consumer of energy leading to supply–demand mismatch (shortages and blackouts). We assume that, a high inefficiency reflects high electricity cost in the sector. A simple dynamic version of the Ramsey growth model is developed, providing analytical solutions and applying simulations to evaluate the economic cost. Results from the simulations show that, electricity shortages and blackouts reduce output, consumption and investments in the economy. Improvements in energy technologies for generating and distributing electricity can offset the negative impacts and improve efficiency in the sector.