Electricity Generation and Economic Growth in Cases of Countries With High and Low Electricity Per Capital Power Consumption in Africa
CHAPTER ONE
Objectives of the study
The main objective of the study is to examine the electricity generation and economic growth in cases of countries with high and low electricity per capital power consumption in Africa.
CHAPTER TWO
LITERATURE REVIEW
Conceptual review
Concept of electricity generation
Electricity generation is the process of generating electric power from sources of primary energy. For utilities in the electric power industry, it is the stage prior to its delivery (transmission, distribution, etc.) to end users or its storage (using, for example, the pumped-storage method).
Electricity is not freely available in nature, so it must be “produced” (that is, transforming other forms of energy to electricity). Production is carried out in power stations (also called “power plants”). Electricity is most often generated at a power plant by electromechanical generators, primarily driven by heat engines fueled by combustion or nuclear fission but also by other means such as the kinetic energy of flowing water and wind. Other energy sources include solar photovoltaics and geothermal power.
The fundamental principles of electricity generation were discovered in the 1820s and early 1830s by British scientist Michael Faraday. His method, still used today, is for electricity to be generated by the movement of a loop of wire, or Faraday disc, between the poles of a magnet. Central power stations became economically practical with the development of alternating current (AC) power transmission, using power transformers to transmit power at high voltage and with low loss.
Commercial electricity production started in 1873 with the coupling of the dynamo to the hydraulic turbine. The mechanical production of electric power began the Second Industrial Revolution and made possible several inventions using electricity, with the major contributors being Thomas Alva Edison and Nikola Tesla. Previously the only way to produce electricity was by chemical reactions or using battery cells, and the only practical use of electricity was for the telegraph.
Electricity generation at central power stations started in 1882, when a steam engine driving a dynamo at Pearl Street Station produced a DC current that powered public lighting on Pearl Street, New York. The new technology was quickly adopted by many cities around the world, which adapted their gas-fueled street lights to electric power. Soon after electric lights would be used in public buildings, in businesses, and to power public transport, such as trams and trains.
The first power plants used water power or coal. Today a variety of energy sources are used, such as coal, nuclear, natural gas, hydroelectric, wind, and oil, as well as solar energy, tidal power, and geothermal sources.
Energy Sector in Economic Development
According to Bihemo (2010) the aim of this chapter is to examine the impact of energy in economic growth and more generally the role of energy in economic development. The energy sector plays a major role in economic transformation of a country, a driven force behind a sustainable economy. The projected growth of an economy depends heavily on the performance and growth of the power sector.
Various policies that promote a secure, competitive, and reasonably priced energy supply will help attract, retain, and expand the growth of an economy. These include policies that support reducing energy costs to consumers, improving the reliability and maintaining its sustainability in developing energy related issues. In addition to these policies, promoting cost effective energy efficiency will improve, energy resource development, with the growth in electricity demand that has occurred over the last decades, adequate and reliable energy supplies are important to economic development.
In other to sustain this economic development, additional energy resources, including electricity generation and infrastructure improvements, must be effectively utilized. Energy is one sector with great impact in the economy; the energy sector can influence the economic development mainly in two ways, Capacity for large investments and price of energy, the investments in the energy sector can stimulate national enterprises and the industrial capacity, while the price of energy is pervasive to all sectors and influences the competitiveness of the country.
Energy is an essential ingredient for economic development. As both agricultural and industrial activities increase, the demand for energy similarly increases. In the developing world provision of a greater access to energy has been suggested by some that will help grow their economies and improve the lives of the poor. As a result progress is being done to provide energy to as much percentage of the population as possible by individuals, firms and governments incentivized from inside and outside the countries and motivated by financial or humanistic interests.
CHAPTER THREE
Model Specification
Having considered various theories on power generation, economic growth, gross capital formation and unemployment, this work is anchored on David Stern Model. In his model on factors affecting linkage between energy and growth, Stern (2004) asserted that there has been extensive debate concerning the trend in energy efficiency in the developed economies, especially since the two oil price shocks of the 1970s. He argued that in the United States of America (USA) economy, energy consumption hardly changed in the period 1973 to 1991, despite a significant increase in gross domestic product (GDP). According to Stern, these facts were indisputable and the break in the trend have been the subject of argument. He referred to Neoclassical perspective of the production function to examine the factors that could reduce or strengthen the linkage between energy use and economic activity over time and depicted that there has been a decoupling of economic output and resources, which implies that the limits to growth are no longer as restricting as in the past. A general production function of Stern can be represented as follows:
CHAPTER FOUR
PRESENTATION OF RESULT
Unit Root Test
The study began with the test of unit root to determine the stationarity of all the employed variables using Augmented Dickey Fuller (ADF) test. The tests were conducted to avoid spurious regression. The results of the test are presented in table 1 below.
CHAPTER FIVE
Conclusion
This study examined the impact of power generation capacity on economic growth in Nigeria from 1980 – 2015. In the model specified, Real Gross Domestic Product is a function of Power generation capacity in Kilowatt, Gross capital formation and Unemployment. With the aid of econometric techniques employed (co integration test, vector error correction mechanism and granger causality); the following results were found that a stable long run relationship exist between the dependent and explanatory variables in the model as supported by the presence of two co integrating equations. This means that the result of this finding can be relied upon in taking long run policy decision.
In the VECM equation result presented above, the t-statistics for PGCKWH is 0.003106 while its P- value is [0.2659]. The t-statistics for GCF is 1.109381 while its P-value is [0.5843]. The VECM result also showed the t – statistics of – 4652.801 with p value of 0.0297, indicating an insignificant relationship with RGDP.
This study concluded that there is no causality between power generation capacity and economic growth in Nigeria within the study period.
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