machinery, equipment, transport, food retailing, cooking and waste disposal. Hence, sustainable energy
solutions for agriculture and food value chains are
a central structural element to any support strategy
for agro-based industries. The agro-processing industry transforms products originating from agriculture
into both food and non-food commodities (ArranzPiera 2017; Rovas & Zabaniotou 2015; Toyin et al.
2017). Upstream industries are engaged in the initial
processing of products, with examples including rice
and flour milling, leather tanning, cotton ginning, oil
pressing, saw milling, and fish canning (Kumar et al.
2016). Furthermore, an energy input is required in food
processing, as well as in packaging, distribution, and
storage (Mawejje & Mawejje 2016).
Agriculture in Uganda, which is predominantly
rain-fed, is increasingly adversely affected by the climate change and variability manifested in erratic rain
patterns, prolonged dry spells, and floods. As a result,
farm-level productivity is far below the attainable
potential for most crops (Fermont & Benson 2011).
Despite efforts, available evidence indicates that the
industrial sector is experiencing slow growth and one
of the factors responsible for this to a considerable
extent is the poor industrial energy consumption. This
is supported by the fact that the industrial growth
especially for the Agricultural sector’s value addition stands at 1.4, Human Development Index 0.484,
small area equipped for irrigation (ha) 14,000 (20072017) (Food and Agriculture Policy Decision Analysis
FAPDA 2017; Mawejje & Mawejje 2016). Access to
clean energy for productive use is crucial if Uganda is
to exploit its agricultural potential.
Besides, the majority of agro-processing industries indicated that electricity is still considered as
the biggest obstacle (World bank 2019). The survey
indicated that they continue to experience power outages: the percentage of firms reporting electricity as
the most important obstacle for their day-to-day operations was 23%. This power interruption has made
firms continue to experience loss in output, low value
addition, high operating costs (total annual electricity
costs), as well as failure to access information, limited
access to production inputs (skilled labour, adequate
capital (equipment and machinery), effective energy
resources that are reliable and affordable (Izadmehr
et al. 2018), and all these continue to hamper their
industrial output (World Bank 2017). Nevertheless,
studies on industrial output effect of electricity access
are limited.
Nonetheless, Uganda has an installed capacity of
1252.3 MW, of which 1,246.5 MW supplies the main
grid and 5.9 MW is off the main grid (Electricity Regulatory Authority 2019). Access to electricity in 2019
at the national level in Uganda is very low at 26.7%
(Uganda Bureau of Statistics 2019). Uganda currently
has one of the lowest electricity demand peaks: 700
MW peak electricity demand against installed generation capacity of over 1252.3 MW, with the highest
average electricity end user tariffs being 669.5 sh/KWh
(consumer customers), 599.2 sh/KWh (medium industrial consumers), 365.7 sh/KWh (large industries
consumers), and 304.7 sh/kWh (extra-large consumer
industries) (Electricity Regulatory Authority 2019;
World Bank 2017).
Subsequently, the Government of Uganda has
focused on increasing access to energy in rural areas by
constructing various hydropower plants and extending
and improving transmission lines to improve agriculture modernization. However, agricultural production
continues to be constrained by the lack of irrigation
systems (FAO 2017; Wanyama et al. 2017). To this
end, GoU allocated UGX 5 billion (US$ 1.92 million)
in 2013 to the Ministry of Water and Environment to
rehabilitate irrigation schemes and provide new irrigation and water harvesting technologies to increase
the water supply by 10.1 million cubic meters by 2017,
however all these continue to fail.
According to the World Bank enterprise survey
(2016), 90% of these firms give gifts to get electricity connections. Similarly, the duration of a typical
outage stands at over 7 hours. Losses due to power
outages also stand at 6% of annual sales (World bank
enterprise survey 2013), and the percentage of firms
reporting electricity as the most important obstacle for
their day-to-day operations was 23% in 2012. Likewise, electricity is still the most commonly chosen
top obstacle in firms’ operations. The production of
goods and services requires energy as an input, which
is called a factor of production. Energy sources vary in
their effectiveness as a factor of production, depending
on their energy characteristics. In this study, electricity is an augmenting input in the production of goods.
Although agro-based industries have tried to appreciate the benefits of electrification, their performance
has remained low. However less empirical studies have
been carried out to this effect. Thus, this study’s aim
was to examine how electricity access can stimulate
industrial output.
1.2 Previous work
The demand for electricity by industry has been the
subject of empirical studies over many years (Lin
& Wang 2019). Previous studies on the causal link
between electricity consumption and industrial output
holding other factors constant have revealed differing views (Carlsson et al. 2020; Mawejje & Mawejje
2016). The results of the existing studies point toward
four main types of causal relationships (hypotheses),
which have been summarized by Mawejje and Mawejje (2016) as follows. First is the growth hypothesis
where causality is one-way: from electricity consumption to output growth (Bekun & Agboola 2019; Ozcan
& Ozturk 2019). Second is the conservation hypothesis in which causality runs from output growth to
electricity consumption (Balcilar et al. 2019; Dey
2019; Odhiambo 2010). Third, the feedback hypothesis proposes a two-way causality between electricity
consumption and output growth (Gorus & Aydin 2019;
Ndlovu & Inglesi-Lotz 2020; Rahman 2020). Fourth,
the neutrality hypothesis is related to no causality
between electricity consumption and output growth
(Aydin 2019; Dogan et al. 2016; Kahouli 2018).
85
solutions for agriculture and food value chains are
a central structural element to any support strategy
for agro-based industries. The agro-processing industry transforms products originating from agriculture
into both food and non-food commodities (ArranzPiera 2017; Rovas & Zabaniotou 2015; Toyin et al.
2017). Upstream industries are engaged in the initial
processing of products, with examples including rice
and flour milling, leather tanning, cotton ginning, oil
pressing, saw milling, and fish canning (Kumar et al.
2016). Furthermore, an energy input is required in food
processing, as well as in packaging, distribution, and
storage (Mawejje & Mawejje 2016).
Agriculture in Uganda, which is predominantly
rain-fed, is increasingly adversely affected by the climate change and variability manifested in erratic rain
patterns, prolonged dry spells, and floods. As a result,
farm-level productivity is far below the attainable
potential for most crops (Fermont & Benson 2011).
Despite efforts, available evidence indicates that the
industrial sector is experiencing slow growth and one
of the factors responsible for this to a considerable
extent is the poor industrial energy consumption. This
is supported by the fact that the industrial growth
especially for the Agricultural sector’s value addition stands at 1.4, Human Development Index 0.484,
small area equipped for irrigation (ha) 14,000 (20072017) (Food and Agriculture Policy Decision Analysis
FAPDA 2017; Mawejje & Mawejje 2016). Access to
clean energy for productive use is crucial if Uganda is
to exploit its agricultural potential.
Besides, the majority of agro-processing industries indicated that electricity is still considered as
the biggest obstacle (World bank 2019). The survey
indicated that they continue to experience power outages: the percentage of firms reporting electricity as
the most important obstacle for their day-to-day operations was 23%. This power interruption has made
firms continue to experience loss in output, low value
addition, high operating costs (total annual electricity
costs), as well as failure to access information, limited
access to production inputs (skilled labour, adequate
capital (equipment and machinery), effective energy
resources that are reliable and affordable (Izadmehr
et al. 2018), and all these continue to hamper their
industrial output (World Bank 2017). Nevertheless,
studies on industrial output effect of electricity access
are limited.
Nonetheless, Uganda has an installed capacity of
1252.3 MW, of which 1,246.5 MW supplies the main
grid and 5.9 MW is off the main grid (Electricity Regulatory Authority 2019). Access to electricity in 2019
at the national level in Uganda is very low at 26.7%
(Uganda Bureau of Statistics 2019). Uganda currently
has one of the lowest electricity demand peaks: 700
MW peak electricity demand against installed generation capacity of over 1252.3 MW, with the highest
average electricity end user tariffs being 669.5 sh/KWh
(consumer customers), 599.2 sh/KWh (medium industrial consumers), 365.7 sh/KWh (large industries
consumers), and 304.7 sh/kWh (extra-large consumer
industries) (Electricity Regulatory Authority 2019;
World Bank 2017).
Subsequently, the Government of Uganda has
focused on increasing access to energy in rural areas by
constructing various hydropower plants and extending
and improving transmission lines to improve agriculture modernization. However, agricultural production
continues to be constrained by the lack of irrigation
systems (FAO 2017; Wanyama et al. 2017). To this
end, GoU allocated UGX 5 billion (US$ 1.92 million)
in 2013 to the Ministry of Water and Environment to
rehabilitate irrigation schemes and provide new irrigation and water harvesting technologies to increase
the water supply by 10.1 million cubic meters by 2017,
however all these continue to fail.
According to the World Bank enterprise survey
(2016), 90% of these firms give gifts to get electricity connections. Similarly, the duration of a typical
outage stands at over 7 hours. Losses due to power
outages also stand at 6% of annual sales (World bank
enterprise survey 2013), and the percentage of firms
reporting electricity as the most important obstacle for
their day-to-day operations was 23% in 2012. Likewise, electricity is still the most commonly chosen
top obstacle in firms’ operations. The production of
goods and services requires energy as an input, which
is called a factor of production. Energy sources vary in
their effectiveness as a factor of production, depending
on their energy characteristics. In this study, electricity is an augmenting input in the production of goods.
Although agro-based industries have tried to appreciate the benefits of electrification, their performance
has remained low. However less empirical studies have
been carried out to this effect. Thus, this study’s aim
was to examine how electricity access can stimulate
industrial output.
1.2 Previous work
The demand for electricity by industry has been the
subject of empirical studies over many years (Lin
& Wang 2019). Previous studies on the causal link
between electricity consumption and industrial output
holding other factors constant have revealed differing views (Carlsson et al. 2020; Mawejje & Mawejje
2016). The results of the existing studies point toward
four main types of causal relationships (hypotheses),
which have been summarized by Mawejje and Mawejje (2016) as follows. First is the growth hypothesis
where causality is one-way: from electricity consumption to output growth (Bekun & Agboola 2019; Ozcan
& Ozturk 2019). Second is the conservation hypothesis in which causality runs from output growth to
electricity consumption (Balcilar et al. 2019; Dey
2019; Odhiambo 2010). Third, the feedback hypothesis proposes a two-way causality between electricity
consumption and output growth (Gorus & Aydin 2019;
Ndlovu & Inglesi-Lotz 2020; Rahman 2020). Fourth,
the neutrality hypothesis is related to no causality
between electricity consumption and output growth
(Aydin 2019; Dogan et al. 2016; Kahouli 2018).
85