Modelling the electricity generation dynamics of Ghana. A Structural VAR Approach

Abstract This study estimates endogenous parameters to ascertain the dynamics in the electricity generation sector in Ghana. An unrestricted VAR model is utilized to examine the empirical ramifications of the Ghanaian electricity energy sector and power consumption. The data period ranges between 2002 02021. Precisely, the results detected structural long run and short run headwinds to the unrestricted models. The findings depict that the reactions of GDP growth rate and electricity from fossil fuels react directly to headwinds based on their correlation. Also, there is feedback relationship between GDP growth rate rand electricity from fossil fuel sources since they are significant, from the granger causality analysis. Furthermore, the impulse function depicts GDP growth rate reacts to exogenous headwinds and the impacts are enduring to an extended period. Furthermore, the Variance decomposition results backed this analysis via having renewable energy without hydropower explaining less than 1% variance due to shocks and total global greenhouse emissions further explains about 85% variance due to headwinds in the time period. Electricity from fossil fuels sources explains more than 100% of the variance owing to headwinds hitting the system. Implying the nation’s overreliance on conventional energy source. Installed renewable energy will grow to over 2500MW by 2036, growing at 57.8% %.Ultimately, this calls for a rapid transformation of energy landscape in the country to a sustainable pathway. This will inform policy discourses regarding diversifying Ghana’s energy mix.