Energy resources allocation for rural industrialization in Ghana

A major policy objective in LDCs is the promotion of rural economic development. One of the ways of achieving this objective is through the promotion of growth in rural industry as a support base for the agriculture sector. However, growth in rural industry comes as a result of technological progress that replaces traditional processes with improved technology. Such technological progress is usually accompanied by interfuel substitution away from wood, so that demand for commercial fuels is increased sharply. These trends constitute additional stress on the energy supply system but are usually overlooked in the LDC energy planning exercise. In this work, the effects of technological progress in rural industry on the overall national energy system are studied. The work takes as its basis the RES model of the entire Ghanaian economy and missing information about energy use and energy demand in the rural sector is accounted for. Assuming a growth path based on the application of improved technology, issues pertaining to inter-fuel substitution and energy demand in rural industry are investigated. These are considered in the context of energy supply and investment planning. Energy balance data for Ghana are used in combination with a multiobjective linear programming (LP) model of the Reference Energy System (RES), programmed in the General Algebraic Modeling System (GAMS), to evaluate energy policy options and their impact on the rural manufacturing sector. Sectoral objectives of national economic policy such as reducing the cost of energy services, increasing rural economic output, and protecting forest resources and the environment, are used to develop the decision trade-offs between supply and demand. It was found that electricity and LPG are preferred over fuelwood for maximizing economic returns in rural manufacturing. In addition, contrary to the popular view held in favor of promoting the use of LPG in rural households, electricity was found to be the preferred fuel. These results together with other information from the output of the LP model are used to make specific policy recommendations for rural energy planning and rural industrialization in Ghana