This study provides a forward-looking simulation analysis of economy-wide and distributional implications associated with alternative pathways for the development of the electricity sector in Ghana and Kenya. It is part of a wider research project ‘Green Growth Diagnostics for Africa‘ that seeks to identify the binding constraints to economically viable investments in renewable energy and to analyse the political feasibility of a transition to a sustainable low carbon energy path in the two countries.
From an economic perspective, significant shifts in the power mix of an economy as well as policy measures to induce or support such shifts are bound to affect the structure of domestic prices across the whole economy with repercussions for the growth prospects of different production sectors and for the real income growth paths of different socio-economics groups. Understanding these economy-wide repercussions is crucial for a study concerned with the obstacles to – and political feasibility of – adopting a low-carbon growth strategy.
The analysis requires the adoption of a multi-sectoral general equilibrium approach that allows to capture the input-output linkages between the electricity sector and the rest of the economy as well as the linkages between production activity, household income and expenditure and government policy.
Thus, the present study develops purpose-built dynamic computable general equilibrium (CGE) models for Ghana and Kenya with a detailed country-specific representation of the power sector to simulate the prospective medium-run growth and distributional implications associated with a shift towards a higher share of renewables in the power mix up to 2025.
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