Electricity, Clean Energy, and Climate Change Adaptation Study.
January 10, 2025 | Ongoing Project | Reading time: 8 min
Introduction
This innovative study is being conducted to understand how family-owned businesses in Ghana balance electricity usage between their homes and workplaces. The study, titled “Electricity, Clean Energy, and Climate Change Adaptation” is funded by the International Growth Centre and the University of California, Santa Barbara. Findings from this study will shape energy policy and promote sustainable energy use in Ghana.
Investigators
Kintampo Health Research Centre: Dr. Kwaku Poku Asante, Dr. Sulemana Watara Abubakari.
University of California Santa Barbara: Flavio Malagutti.
Background
Nearly 1 billion people lack access to electricity worldwide. Ghana has taken energy access seriously. The country has one of the highest electrification rates in sub-Saharan Africa with 85% of its population connected to the grid. As Ghana closes the electricity access gap, policymakers are challenged to incentivize households toward using it as their primary energy source. At the household level, electricity is the cleanest alternative to biomass combustion, which is the most prevalent source of energy in Ghanaian households. When it comes to cooking energy, electricity is even cleaner than LPG.
Firm-households are special because their decision processes (and thus the incentives they respond to) are more complex than those that do not own businesses. Households that own businesses need to balance their choices and internalize costs and benefits across two locations, their residence and commercial enterprise. It follows that household members need to allocate resources to optimize two separate problems: household welfare and firm profits. Crucially, the more profitable the family business, the larger the household’s budget and ability to care for its members. This simple logic suggests that household members would be sure to allocate their resources first to maximize their firms’ profits. In this study, we hypothesize they do not and investigate why.
Objectives
This study aims to examine whether firm-households are misusing commercial electricity and to explore the reasons behind this behavior. Specifically, it seeks to answer the following questions:
1.Do firm-households separate
their residential and commercial electricity usage across their respective accounts?
2. If not, what factors influence their energy consumption patterns across residential and commercial meters?
Methodology
This study uses a combination of questionnaire-based data collection and a field experiment targeting firm-households in Techiman. The research process begins with household visits, during which a structured questionnaire is administered to collect detailed information. This initial phase sets the foundation for the subsequent field work.
After administering the questionnaire, a randomized controlled trial (RCT) is implemented, and participants randomly divided into two experimental groups. The first group receives electricity rebates as an incentive to potentially influence their consumption behavior. The second group receives an unconditional cash transfer, equivalent in value to the rebate offered to the first group. This design allows for the evaluation of different forms of financial incentives and their impact on electricity use.
As part of the study, the Northern Electricity Distribution Company (NEDCo) provides meter-level data on residential and commercial electricity consumption for customers in its Techiman administrative area. This data is used to calculate the average electricity consumption for each meter, which is given as information to study participants to know about their energy consumption. The feedback given to participants includes information such as the number of units consumed and the cost per unit, helping participants understand their energy usage in detail.
The study also seeks to determine whether providing participants with detailed consumption information and clarifying electricity pricing mechanisms, increases their awareness of the price differences between residential and commercial meters. The researchers monitor changes in participants’ electricity consumption behaviors over time, using NEDCo’s data to track trends and shifts following the intervention.
Finally, the study integrates data from the questionnaires with electricity usage records to explore the relationship between energy consumption patterns, household health, demographics, and fuel choices, including fuel stacking behaviors. This comprehensive approach aims to dicover insights into the factors driving electricity use among firm-households and the potential for targeted interventions to influence energy consumption behaviors
Expected Outcomes
The study is expected to generate knowledge on how family-led microenterprises allocate electricity usage between their households and firms and respond to incentives to use clean energy sources at home. Again, this study will provide evidence on the
following.
(i) Whether firm-households have a reasonable understanding of their electricity tariffs and the amount of electricity used by their appliances.
(ii) Whether credit constraints prevent
households and firms from adopting more energy-efficient appliances.
(iii) Whether firm-household members actually do have a high demand for electrical appliances but place them in their businesses, instead of in their homes.
Funders
International Growth Centre University of California, Santa Barbara.
Start Date : September 2023
End Date : 31 Dec 2025