Energy demand model for Volta River Authority

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The development of energy sources to accomplish useful work is essential if a country is to make industrial progress and continually improve the standard of living of its people. Shortfalls in national electricity supply were experienced in Ghana in 1983, 1998, 2006 and 2007. Evidently, an accurate forecast of electrical energy demand is one of the first steps in ensuring adequate and reliable energy supply. Under-forecasting results in energy shortages with far reaching costs* for a nation whereas over-forecasting may also result in large amounts of capital being uselessly tied up for long periods. In this paper, candidate multiple regression and exogenous autoregressive demand models are developed in respect of the national electric power generation concerns of the Volta River Authority (VRA) of Ghana. Real GDP, real electricity price and the ratio of urban population to total population were used as explanatory variables for the multiple regression models. The electricity demand elasticities for the regression model were found to be 2.19 and -0.09 relative to real GDP and electricity price respectively. These demand elasticities were found to be comparable to results reported by a number of other authors. The exogenous autoregressive model gave demand elasticities of 0.74, 0.26 and -0.05 relative to electricity demand for two preceding years and price respectively. Demand forecasts for 2002 to 2007 were made using the models and the results were compared with actual energy demand for the six-year period as well as with exponential smoothing, and an Acres International/VRA model. The autoregressive model which used the natural logarithm of electricity demand for two preceding years and current real electricity price as exogenous variables performed much better than the other models.
A Thesis submitted to the Department of Information Systems and Decision Sciences,Kwame Nkrumah University of Science and Technology in partial fulfilment of the of requirements for the degree, 2008