Determinants of aggregate electricity demand in Uganda

Abstract

Purpose: The purpose of this paper is to investigate the determinants of aggregate electricity demand in Uganda. Methodology: Using quarterly data over the period 2001-2015, the study employs time series diagnostic tests of stationarity and cointegration to investigate data behaviour; there is a check for direction of causal relationships between the variables in the empirical model; and the adoption of time series econometric analytical techniques to establish the determinants of electricity demand. Findings: The study results indicate that the lagged values of electricity demand in first difference, the random shocks and first differenced current values of GDP are the most significant determinants of electricity demand. The study suggests that rather than price, income is more significant in influencing electricity demand. Practical Implications: The study sheds light on the key determinants of electricity demand in Uganda. The stakeholders in the electricity sector may use the findings of the study for better electricity demand forecasts, optimization of electricity production and to improve electricity sector planning. Originality/ Value: The paper answers lingering questions on the drivers of electricity demand in Uganda and further contributes to the limited literature and empirical evidence regarding the factors that contribute to the demand for the national grid electricity in Uganda