Energy including electricity plays a significant role in the economic development of a country as it enhances the productivity of capital and labour. Many of the developing countries are plagued with energy problems: predominantly by their over dependence on low quality, traditional fuel and the over reliance on imported commercial fuel-oil. Some of the problems associated with energy forecasting in developing countries may include lack/insufficient data.
This study was conducted in two phases and begun with the reviewing of literature on energy and the different determinants of energy in a developing nation. Access to electricity is particularly crucial to human development as electricity is, in practice, indispensable for certain basic activities, such as lighting, refrigeration and the running of household appliances, and cannot easily be replaced by other forms of energy. Yet, many developing countries are faced with the challenge of providing adequate and modern energy services to its communities, which in turn is expected to improve the standards of living through increased income and employment generation.
The second phase of this research was developing and modelling demand for residential electricity using secondary data. This task was challenged by the inadequacies in the quality and availability of data on the one hand and the unrealistic assumptions of many existing models used to predict energy consumption in developing countries on the other. The contribution of this thesis here was also to consider a wider set of factors that are traditionally used in energy modelling. Many previous studies had been focusing on income as a determining factor affecting demand for energy (for example, the energy ladder theory).
However, this study found that there are many other factors such as the informal economy (activities within the economy that is not declared or included in the gross domestic product of a nation), urbanisation and transformation from rural to urban areas that may have a significant impact on how energy in the residential sector is demanded. It was therefore important to exceed beyond unquestioned assumptions of the orthodox belief and to focus on the processes of urbanisation and change as realities facing many developing countries.
In order to develop a deeper understanding and analysis of the residential energy sector, this research offered a thorough examination of the literature on modelling techniques, their underlying theories and assumptions and the choice of variables and measurements. This led to the selection and identification of the factors influencing energy demand and helped determine the modelling techniques finally used in the thesis.
In order to achieve the aims of the study, a mixed method approach was adopted. The use of quantitative (secondary and primary) data as well as qualitative (case studies, face-to-face interviews and semi-structured questionnaires) helped the researcher to test a number of established hypotheses and offer a deeper understanding of the questions in hand.
Through using various statistical techniques the study was able to examine the relationship between different selected variables which can help forecast the demand for residential energy. Furthermore, with the use of a structured questionnaire survey of the households, socio-economic data were collected from 501 households in Ibadan metropolis in Nigeria which provided the premise for understanding factors other than income that are responsible for determining the type and level of energy consumed in households. The analysis involved the use of ordinal regression as households neither use the same fuel in the same combination or at the same level.
In sum the thesis made the following contributions: i) a better understanding of households energy consumption which have implications for a successful energy analysis for households in Nigeria as well as other developing countries; ii) a tested methodology for analysing the determinants of household energy. The results showed that household income and price of energy do not have a significant effect on the consumption of energy in the household. It was rather factors such as the location of the property, the ownership status of the property and the expenditure spent on energy that seemed to be more relevant in determining the consumption of energy in the households.
The evidence from the study suggests that there is divergence in the energy need of households and hence the different determinants for various fuels. The concept of energy ladder as suggested by earlier researchers was not confirmed by the findings. Instead the study supported the work carried out by Heltberg (2003) and confirmed that income alone may not be sufficient to determine the consumption of energy by a household. It was rather factors such as the location of the property, the ownership status of the property and the expenditure spent on energy that seemed to be more relevant in determining the consumption of energy in the households. This research also highlighted the importance of the various socio-cultural factors that affects the consumption of energy within the household, and in the same vein, it showed that economic contribution is not the sole determinant in the choice of fuel energy.