What Drives Energy Efficiency in Africa? Insights from 12 Selected Countries Using Incremental Decomposition Analysis

School of Finance and Economics Jiangsu University

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Abstract: This paper examines why Africa, and Sub-Saharan Africa (SSA) in particular, has some of the worse energy efficiency indicators in the world. It examines the relationship between total primary energy supply (TPES), final energy consumption, and transmission and distribution (T&D) losses on the continent. We apply the Sun-Shaley incremental decomposition method of logarithmic mean divisia index (LMDI to twelve (12) African countries using data from 2000 to 2016 to decompose TPES into the effects of changes in final energy consumption (FEC), population change (POP), carbon dioxide (CO2) emissions, and economic activity measured by gross domestic product (GDP), and their impact on energy efficiency. The method provides a precise decomposition analysis and incremental results that can be added to study the long-run impacts without any information missing in between. The findings show that the study countries have worsening energy efficiency indicators with energy intensity (EI) as high as 55%, coupled with an inefficient transformation of primary energy supply to final consumption, culminating in significant systems losses. It was further discovered that countries that have more significant proportions of renewables sources in their energy mix have lower transmission and distribution losses. This study serves as a guide to the policy discourse regarding the energy efficiency situation in Africa.