The determinants of electricity demand in Uganda
Abstract
This research attempts to analyze the determinants of domestic electricity demand in Uganda ; this is to try and provide policy solutions to balance the fast growing supply of electricity with the slow growing demand in the economy. The issue of excess electricity supply is a growing concern for the country. In 2014/15 Auditor General‘s report the government spent about Shs77b on idle Independent Power Producers that did not generate a single megawatt of power. As at 2016, the country had an excess supply of 164MW and this is projected to reach 2,107MW by 2024 because the demand is growing at a slow rate of 6% per annum. The objective of the research is to determine the main factors that affect the domestic demand for electricity and to perform correlation tests to determine any associations and casual relationships that may exist between the identified factors and demand for electricity. The method of analysis is qualitative and the tool for correlation tests is Bi variant and Simple Regression Analysis. The literature review showed that several countries and cities have identified the factors that affect their demand for electricity and have used the information for policy formulation, but no such analysis has been done for Uganda and this study aims at addressing this research gap. The correlation tests revealed that there exists relationships between domestic demand and the seven factors that were analyzed; price of domestic electricity, availability of alternative energy source, household income, number of customer connections, availability of electricity subsidies, willingness to pay for the electricity consumed by households, test and preference for different energy sources .Furthermore, 90.1% of Ugandans prefer grid electricity compared to other sources of energy such as solar or generators. Despite this high preference, only 20% of Ugandans have managed to access grid electricity which has resulted into suppressed demand. Efforts to increase access such as the use of Rural Electrification Program and the Output Based Aid (Household Connections Project) have been hampered by high wiring costs and the lack of sensitization. The willingness to pay for electricity consumed is very low with 54.5% willing to pay between UGX 1,000 to 10,000 per month compared to the electricity price charged to the consumers. Past efforts to use subsidies to lower the tariff failed to provide a sustainable and long term solutions to the issue of stimulating demand. Six policy recommendations have been put forward on how to address the issues of high price (tariff), increase electricity access, increase ‗lifeline‘ units, and manage subsidies so as to stimulate demand to match the fast growing supply