Elsevier

Energy Policy

Volume 28, Issue 13, November 2000, Pages 923-934
Energy Policy

Electricity use and economic development

https://doi.org/10.1016/S0301-4215(00)00081-1Get rights and content

Abstract

A study of the relationship between electricity use and economic development in over one hundred countries, constituting over 99% of the global economy has been undertaken. Correlations between electricity consumption/capita and GDP/capita have been analysed and compared with those between total primary energy supply/capita and GDP/capita. A supporting analysis has correlated the proportion of energy used in the form electricity, the `e/E ratio', with GDP/capita. The general conclusions of this research are that wealthy countries have a stronger correlation between electricity use and wealth creation than do poor countries and that, for the global economy as a whole, there is a stronger correlation between electricity use and wealth creation than there is between total energy use and wealth. The study also shows that, in wealthy countries, the increase in wealth over time correlates with an increase in the e/E ratio. The results imply that the energy ratio ($/toe) should be replaced by the electricity ratio ($/kWh) as a development indicator and, more precisely, by the e/E ratio (kWh/toe).

Introduction

A preliminary study (Ferguson et al., 1997) in a research programme on the benefits of electricity generation showed that for the G7 group of countries as a whole (USA, Japan, Germany, France, UK, Italy and Canada), constituting two-thirds of the global economy, there was a well correlated relationship between electricity use and wealth creation but no correlation between total energy use and wealth. The latter conclusion is surprising because the energy ratio, GDP/tonne oil equivalent ($/toe), is widely accepted as an important indicator of a nation's stage of development and is used as such by The World Bank (World Bank, 1999). Such findings indicate the essential role that electricity, rather than energy in general, plays in the development of modern society with its substantial associated market and non-market benefits.

A wider study has now been undertaken covering over one hundred countries, together constituting over 99% of the global economy. The analysis is for all the countries for which data are available (IEA, 1997) and covers the period 1960 – 1995 for OECD countries, excluding the newly joined members of Mexico, Hungary and the Czech Republic where, as for all the Non-OECD countries, data are only available for 1971 – 1995. The 24 original OECD member states (excluding Mexico, Hungary and the Czech Republic) constitute the Annex II group of countries, under the Framework Climate Change Convention.

The correlations between electricity consumption/capita and GDP/capita and between total primary energy supply/capita and GDP/capita over the periods specified have been examined individually for all the countries covered. A supporting analysis has also been undertaken correlating the proportion of total primary energy supply taken as electricity consumption, the `e/E ratio’ (in kWh/toe), with GDP/capita, individually for all these countries.

Total primary energy supply includes all combustible renewables and wastes such as the use of biomass and animal products in the rural areas of developing economies.

The form of Gross Domestic Product (GDP) used in the analysis is GDPPPP compiled using purchasing power parities (PPPs). PPPs are the rates of currency conversion which eliminate the differences in price levels between different countries that occur because of fluctuations in exchange rates. A given sum of money, when converted into different currencies at PPP rates, buys the same basket of goods and services in all countries. The GDP figures are in 1995 US dollars.

Section snippets

National analyses

Table 1 shows the correlation coefficients resulting from the analysis of the relationship between electricity consumption/capita and GDP/capita for all the countries individually for the periods specified.

All of the OECD countries (excluding the new members of Mexico and the Czech Republic for which data are only available from 1971) correlate with a coefficient of at least 0.9 to one significant figure, demonstrating a very close relationship. Over half of the countries analysed, including

Regional analyses

To attempt to simplify the results of the study, and represent the conclusions in the clearest manner, the countries that have been individually analysed have been grouped into the IEA standard classifications of the OECD and the five Non-OECD regions of Africa, Latin America (excluding Mexico), Asia (excluding China), Middle East and Non-OECD Europe. The average correlation coefficients for these for the analyses of the relationships between electricity consumption/capita and GDP/capita, total

Conclusions

A study has been undertaken of the relationship between electricity use and economic development for over one hundred countries constituting over 99% of the global economy. The general conclusions of this research are that:

  • 1.

    Wealthy countries have a stronger correlation between electricity use and wealth creation than do poor countries.

  • 2.

    For the global economy as a whole, there is a stronger correlation between electricity use and wealth creation than there is between total energy use and wealth.

  • 3.

    In

Acknowledgments

The authors would like to thank George Barrett, Ian Teasdale, Tony Robson, Bill Turner, Dave Thomas, Michael Jones-Lee, Nick Eyre, Carolyn Craggs, Tim Barmby and Martin Robson for their valuable comments, and PowerGen and the Westlakes Research Institute for their support.Professor Bob Hill has sadly died since this study was undertaken. He played a leading role in the development of photovoltaics worldwide and saw this research as an important argument for the widespread adoption of solar

References (3)

  • Ferguson, R et al. 1997. Benefits of electricity generation. IEE Engineering Science and Education Journal 6(6),...
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