Relationship between Electric-Power Sector Development and Socioeconomic Parameters: Statistical Analysis Approach

Abstract

Electric power is a critical commodity of the modern world where demand for electricity has been increasing significantly in the last decades, and it is expected to keep increasing in the future. Several socioeconomic factors affect and get affected by the electric sector development, but the literature falls short in studying such relationships in a holistic approach. The goal of this paper is to study how the electric power sector development (i.e., electrical power consumption per capita and electrical losses during distribution) is associated with the socioeconomic indicators of economic growth, human development, and corruption. The research methodology comprises a series of statistical tests, such as the correlation analysis, linear regression, panel analysis, polynomial regression, and Granger causality testing. The findings show that there is generally a relationship between electrical power consumption on one side as well as economic growth, human development, and corruption on the other side. This relationship emerges when studying all the data from all countries as a whole but not necessarily for each country separately. In general, countries that have healthier economies, more advanced human development, and low corruption tend to have higher electrical consumption per capita. Regarding the causality between the parameters, results show that there is no causality effect on the short term between electrical power consumption and any of the socioeconomic indicators under investigation. Also, it was found that there is generally a positive relationship between low corruption and low electrical power losses. In countries with higher corruption, there are large amounts of electric power that is lost (i.e., the power is generated but is not billed). However, overall, an analysis of the relationship between corruption and electric power losses are mixed and hard to interpret. Ultimately, this research emphasizes that the dynamics of the electrical power sector should be examined from the economic and social perspectives and not only the engineering technical perspective.