The Libyan Energy Sector Compared To Uk

Published Date: 02 Nov 2017

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Introduction

It is axiomatic to squabble that electricity has proved to be a basic necessity in any economy across the globe. The growth of every economy purely relies on the kind of energy which is being used.

Libya is not exceptional, for the growth of an economy to upsurge; electricity plays a major role as one of the drivers, these runs from the energy being used, labor, and government policies among others. The major hurdle that is faced by every government is the amount of energy which is required and the source of the same. Libya is known to be among the top oil producing countries in Africa and the entire globe.

Electricity plays an important role in the production of the oil and also driving other sectors in the economy. Most of the industries in the country use electricity in their entire production process. It is therefore the prerogative role for the government to ensure that the right supply of electricity is availed to the economy. The government must work towards eliminating all kind of barriers which might discourage investors from investing in the economy. There are a number of determinants which affect electricity demand in Libya. This dissertation will discuss some of the determinants which affect the level of electricity demand in the country. The paper will discuss some of the aims and the objectives of the paper with the adoption of both qualitative and quantitative research methods. The paper will finally include survey which will be applied in the collection of data.

The production and supply of electricity in the recent past has been a major concern to a number of companies in the country. Libya currently is producing a capacity of about 4.6-4.7 giga watts. The peak load of production is around 3.3 GW. Most of the electricity stations are fired by oil though a number have been converted into the natural gas. The demand for power is growing annually at around (6-8) %. The statistic reached 5.5 GW in 2010 and in 2020 it is expected to reach 10.2GW. In 2004 during summer the nation was faced with widespread blackouts, the reason given was that the existing power plants could not meet the existing demand in the economy. In order to reduce the instances of blackouts in the economy and to meet the cost of the up surging demand, General Electricity Company which is a state owned company spent $3.5 billion in 2010. The amount was intended to be used in the construction of eight new steam cycle power plants. The construction though started in 2004 it was derailed due to lack of finances

Statistics in the country indicates that the demand accounts for the electricity for the largest single share of the total consumption which represents a \total of 30% of the total share. This proportion is about twice of what is used by the industry. The upsurge in the growing demand is undoubtedly and can only be met with proper maintenances of the existing systems. It is important to notice that currently the country is drawing its power from neighboring country to help in meeting the growing demand. Analysts have stated that the problem can only be solved if the government manages to construct the proposed power units in the country. Foreign companies that were working on these projects should also be requested to come back to Libya.

Before the revolution in the country, there were five main projects which were going on in different regions of Libya and these includes Misrata, North Benghazi, Obari, West Tripoli and the Gulf Site. The majority of work has been done in three out of the five projects, though minimal work has been done in Tripoli and Obari since the revolution started. Serious operations have since not began given the fact that a myriad of companies that were working on them were still weighing the security situation in the country. The companies include Dawoo, Siemens and Gama Electronics. Libya also intends to make use of its vast renewable energy potential. Research has shown that the country has some of the largest swathes of Sahara desert and also it has the highest level of solar radiation in the whole world. The country also has a very high average speed of wind in a number of locations in the country and therefore making it a good destination for various wind energy firms. Libya authorities have identified the potential in the country and intends to ensure that 10% of electricity generation in the country be purely covered by renewable energy. Government records show that improvements in the electricity use in the country can ensure the reduction by 2160MW by the year 2020.

It is no doubt that the country is doing enough to ensure that the supply of electricity is sufficient to ensure efficiency in the production activities in the country. Various branches of the government have put enough required effort in ensuring the supply. There are though complexities which were brought by the incidences of revolution which rocked the country. Different investors both local and international have piled a lot of necessary pressure on the government to ensure that they work on various projects which are aimed in ensuring that electricity is availed in the country. With the upsurge in concern, one question that puzzles the minds of the populace and other players is the pressure behind the need to have more electricity. This leads to the investigative question on knowing the succinct factors which affect the continued increase in demand of electricity in the country. (Berndt, 1991)

This section of the research will discuss some of the determinants of demand for electricity in Libya. This is the main objective of the paper.

AIMS AND OBJECTIVES

The analysis of this paper is to identify some of the major determinants that affect the electricity demand in Libya. The research paper is aware of the current electricity projects in the country and therefore will put them into consideration. It will also look at how some of these electricity projects can affect the economy. The main objectives of the paper will include;

Effect of internal/external determinants of electricity projects in Libya

It is right to include that electricity affects the major sectors in the economy. Some of the current electricity projects in the country include Dawoo, Siemens and Gama Electronics. These companies stopped their operations as a result of the revolution which rocked the country in 2012. This resulted into a higher interference with a number of government and private projects in the country. The completion of some of the projects will majorly depend on the political condition in the country. If there is no peace then it is likely that a number of these projects will not continue. The completion of these projects will also depend on the willingness of the companies to come back and continue with the project. The main concern has been tagged on the issues to do with security which the government has not managed to solve. Financial support is very important when it comes to completion n of such a major project. Being a dependent variable in the completion of the power plants, it is important that there is availability of money to ensure completion. A larger proportion of the companies’ budget is currently on the reconstruction of the major infrastructure projects which were destroyed during the revolution in the country. Another determinant for the construction of the project is the continuous demand for electricity in the country. (Halvorsen,1993)

The forecast in econometrics adopts the use of the economic theory of demand as the main organizing principle to model the demand for electricity in Libya. (LIBYA 2001) The total demand for any product which includes electricity, Is the sum of demand for the individual consumers within the market. The part of the market demanding for use of electricity for electric practices is mainly pushed by factors whereby individual consumers are sensitive. At the same time both industrial and commercial sectors demand for electricity, and the factors which affect the demand and are those which are very sensitive.

The residential demand for electricity in the country is presumed to be mainly resulting from various exercises of choice whereby the consumer maximizes the welfare which is subjected to the budget constraint. The demand for electricity by the consumer is believed to be a function of price complements like natural gas and the consumer choice. It is worth noting that electricity does not convey any benefit to the consumer. According to Berndt (1991) the consumers in most cases instead will gain from the services of the appliances which mainly require electricity. The services include cooking, refrigeration, air conditioning, drying and washing clothes among other numerous services. For commercial and other industrial activities electricity is a major factor of production which is inclusive of the inputs. Halvorsen, (1993) the presented demand for electricity is believed to be resulting from a number of decisions which are taken by the producer when it comes to the maximization of profits. For the producer who is interested in maximizing profit, the price of any related product which includes the electricity is mainly driven by the prices, level of output and the price of other related products. Their demand for electricity is also influenced by other factors which include water and weather condition in a country.

The existing market demand for electricity in the country depends on the number of consumers, the level and type of goods which are being produced in the country. The demand for the residential is mainly forecasted per individuals/ households and industrial basis. The industrial and commercial electric sales are mainly influenced by the employees and the projected demand for electricity for their smooth operations.

Per Capita Income

Income is one of the main determinants of the residential electricity demand in Libya. The changes in income will highly influence the amount and quantity of electricity which is being purchased by the populace. Where there are any changes in income then there will be changes in the electricity consumption in Libya in two main ways. The first one is that when there is a change in income, there will be an inducement of change in the intensity in using of electricity consuming appliances as they should ensure they evaluate the adoption of the constrained budget. The second one is that the change in income will result into the inducement on the stock of electricity of consuming various appliances and consumers are in a position of purchasing either more or even fewer electricity intensive devices. Therefore as the income changes the demand for electricity will either fall or rise. Therefore the real capital income can be applied as on the explanatory variables.

Employment trends

The non-residential demand for various commercial and even non commercial use electricity is often influenced by their economic output like the manufactured quantities and the number of customers who are served. A very high input means that there has been an additional use of electricity. The data of the output in Libya is seldom available in a level which is consistent and therefore the output proxy can be used instead. The non-farm employment has been in the past relied on for this purpose. By the virtue and the hope of the necessity feeling, there should be adequate employees in to help in the achieving of the desired levels of output. This is also a sound output though is not subject through the consistent problems.

In Libya, the present forecasts of the economic indicator which includes employment and income, the concept of universality assumes that the relative high growth in the next decade in Libya.

Population trends

Population is a cause, though important causal variable since population trends are applied when it comes to the projection on the number of persons who are staying in a country and might be interested in the electricity in the country. These groups of people will influence the electricity demand in the country. In Libya both the size and the number of the households plays a very important role with regards to influencing the electricity demand in the country. The household numbers on a higher note affects the total number of the residential customers who are in a position to purchase electricity and also the variations on the size of the households will affect the level and size of usage of electricity. When the numbers of customers are high then it means that the demand for the electricity will be high. High number of the residents will be in a position to demand the electricity. This will lead to an upsurge on the pressure on the supply of electricity. (Berndt, 1991)

Despite the fact that smaller households use less electricity in absolute, the existing relationship between the electricity usage and the size of the households does not in any way scale linearity as the use for the household electricity reduces at rates which are lower than the existing number of the households. There is a high close relation between the rate of household formation and the population growth and they both affect the usage of demand for electricity. Despite this, the household size in Libya saw a very slow but a steady decline. Besides there is also the change and the societal norms which happen over period of time.

A number of studies have been done so as to quantify the responsiveness of the electricity demand, income of other determinants for electricity demand, like electricity price, the use of electricity data consumption, real electricity, real GDP and other explanatory variables. The latter includes urbanization, measures of temperature, prices of the appliances, lagged measure of the electricity consumption and therefore the determination on the rate of adjustments in the changes in various economic variables. In the controlling and provision of electricity to the populace and the companies, Libya’s authority must take the above variables into consideration.

A myriad of econometric issues underlie the process of estimating the responsiveness of the price of demand for electricity which makes it complex than the typical demand estimation curve. As opposed to a number of standard goods, consumers of electricity never face any single price, though a price schedule with either increasing or decreasing block pricing. The marginal price purely relies on the level of consumption and influences the level of consumption. The adoption of average price as the main determine of consumption of electricity is purely based on the assumption that consumers often respond to the price which is obtained from the electricity bills. Both the average prices and the ex post are simultaneously determined with the level of consumption therefore their entire inclusion as the explanatory variables results to explained correlation between the error term and price of the electricity demand equation. A number of economists have recommended that inclusion of both the marginal price of the last block consumed and also the average price as the calculated predictors in the demand function though recommends the use of actual values obtained from the ex post values and the price schedules. These variables are important also when it comes to the process of quantifying the results. Besides, the explanatory variable such as the lagged dependent variable, prices of electricity, stock of electric appliances and per capita income are more likely to endogenous and can result to a simultaneous bias in the specific reduced form of the presented dynamic model of the electricity demand. A myriad of recent conducted studies are mainly integration techniques which are used so as to avoid the surplus regression between a variables that can be driven and pushed by the time trends and also the controlling of various explanatory variables.

The researched estimation of various elasticity’s of the peculiar characteristics that influences the various choices of the specific model and even the data that is being used. In Libya, the demand for electricity is the supply constraint though not demand driven. This can result in the limit of the real meaning of price inclusion of the price in the demand equation for electricity given the fact that Libya is associated with a lot of rationing and also that the electricity use is seldom metered and charged at some fixed rate. Consumers in Libya often face outrages in electricity and the amount of down time should be taken into consideration when it comes to the estimation of the demand for electricity from the utilities. The application of partial adjustment models is associated with problems in the country since the over investment in social and industrial capital investments. Therefore the previous period’s capital stock may not be in a position to constrain the consumption of electricity in service and industrial sectors. Besides, there should be a distinction between the electricity access and the demand for the electricity since the universal access to electricity is not a reality as opposed to those in the developed countries.

In Libya, price elasticity of demand is low in the short run with a reported increase in the long run. It is also shown that the price elasticity of electricity often increases with income. Despite the frequent low price elasticity’s of demand in Libya research indicates a strong universe relationship. The demand for electricity in Libya is income inelastic especially in the short run. In general, the elasticity demand in service and commercial sectors tends to be output and income elastic as opposed to the residential sector in the country. It is also a fact that the per capita of electricity consumption upsurges with both income and the rate at which income increases. There is also an increase in demand for electricity with the socioeconomic development which includes the urbanization, industrialization and literacy rates. The impact of the above indicated variables is low in the country as opposed to developed countries like United Kingdom, Japan, Canada, and USA among other developed countries across the globe. Despite this, there is actually no specific pattern across various regions and the income groups which indicate that the responsiveness of the consumption of electricity to the variables mainly and purely relies on the specific factors of the country.

Other explanatory variable factors which have been included in the explanatory variable like urbanization and climatic factors are very important. Studies also indicate that very low temperatures in most cases raise the consumption of electricity in Libya and that the maximum temperatures are in most cases associated with the demand for electricity though the minimum temperatures have insignificant effect in the lowering of electricity in other countries compared to Libya. The variations in temperature over a given period of time but though not in areas affect demand for the electricity in the country. The degree days have the significant positive effect when it comes to the consumption of electricity in Libya during the period where rationing is common. The process of urbanization is expected to drive demand upwards for the electricity through the provision of higher access to the grid and also an upsurge use of electrical appliances as the exposure to advertising and media increases. Other studies indicate that consumption of electricity in the country significantly goes up with the increase in the level of urbanization.

The cross price elasticity’s for the electricity consumption are rarely estimated to be significant in one single equation electricity demand equation. Despite this ,a number of research have indicated that the estimation of the translog cost functions for the manufacturing sector in the country show a possibility of substitutions between electricity and oil gas, diesel and electricity. Besides, the responsiveness of the consumption of electricity is also influenced by the shortages of power. The estimates of the demand adjustments vary across the nation and within different sectors. This might be relatively slow in others maybe as a result of a high costs involved in the replacement of electric equipment. The lagged prices are significant determinants when it comes to the future consumption of electricity in the country.

Other studies have also been done to explain the determinants of demand for electricity in Libya at the household level through the use of micro data which is obtained from the household surveys. In Libya, a lot of energy used by a number of households comes from fuels like candles, kerosene and biomass. There has also been the use of an energy ladder model in the conceptualizing phase in the switching of fuel from the universal reliance of biomass to the transition of fuels like coal, kerosene and liquefied petroleum gas, electricity and gas. It has also been found out that the urban households consume a higher share of electricity and the fossil based energy sources as compared to the rural households with the main transition to the modern energy types in the urban locations increasing the education and income.

Demand for the electricity therefore is no doubt expected to be mainly driven by education, income, size of the household, their dwelling type and size, prices of electricity, weather variables, alternative fuels, and the cost of the availability of suitable appliances. There has been an estimation of this demand through the use of average price of electricity as a logarithmic function form and explanatory variable. Despite the fact that demands for electricity is income and price inelastic, in Libya just like other countries both developing and developed, the estimates in Libya are relatively higher. This shows that as the income levels in the country increases, the consumption of electricity will relatively increase as it could happen in developed nations. The low price elasticity means that any future projected increase might lead to serious reduction in demand. A number of studies indicate heterogeneity when it comes to the demand for the electricity across different households with different demographic characteristics, sizes and other locations. Others have analyzed the influence of reported differences existing in the compositions of various owned home appliances on the consumption of electricity through the construction of index that helps in the capturing of the requirements of average electricity of every appliance as opposed to just a number of appliances or just an account to end uses of every type that dwells. These studies also show that these stated measures indicate significant effects to the electricity demand in Libya.

Libya just like any other developing countries in the world is faced with problems on the capital goods. Being a pre requisite variable in the development of any economy, the countries have tried to ensuring that there is sufficient supply of electricity. External investors can only be attracted to economy which offers a conducive and affordable ground for doing business. The cost of electricity in most of the developing companies has been reported to be very high. It is also noted that the government has not put enough required support various sectors in the economy. Diversion of other forms of energy as tried in other countries such as India has not been in a position to offer the solution to most of the affected countries. Empowering of the populace is very important for any economy that is interested in reducing the level of dependency and poverty. Electricity empowers the citizens since they are in a position to be involved in various business activities. An increased demand for electricity in a country indicates a promising economy. It means that the income levels of people are increasing besides their population size and the households. Relevant policies must be adopted by the government to ensuring that the demand is met. The completion of various electricity projects in the country will provide a very good solution to help in addressing some of the concerns. (Parker & Parker, 2006)

Current practice in the Libyan energy sector compared to UK

The production of energy in Libya has been on the increase at an average rate of 20% since 2004 until 2012 when violence rocked the nation. During the same period, the export of energy also decreased by a value of 27%. The domestic energy consumption is mainly being influenced by the population and the increased number of industries. Between 2004 and 2008 the population of the country grew by 9.4%. Being an oil exporter, the countries energy production got a high stimulation through growing population in neighboring nations like Egypt and Saudi Arabia. Given that oil is 10th in terms of oil export, the country concentrates a lot in the production and transport of the energy. (Parker & Parker, 2006)

In the UK, the trend is a bit different. In the share of different fuels in the country electricity sector, Gas energy takes a 45% proportion, coal takes 28%, nuclear 18%, renewable, 7%, imports 1% and the other proportion is taken by others. Of the total generating capacity in the country, United Kingdom expects to close 21 of them by 2025. The country is currently towards sourcing more of renewable energy to help in driving most of the sectors in the economy.

Factors contributing to an econometric framework of demand function for electricity in Libya

The discussion in this paper will adopt a model that will be applied in understanding the demand for electricity in the country. There are a number of factors which determine the demand for electricity in Libya. Some of the factors that will be included and used in the construction and analysis of the model includes average electricity price at a given time in Libyan dinars. The other one is real income which is expressed in terms of real Gross Domestic Product in a country. Number of the populace at a given particular time will also be used in the construction of the econometric model. The other factor is the number of imported appliances in a country at a given period of time. The paper will also take into consideration the existing differences between the average maximum and also the average minimum temperatures at a given period of time. The other one is the existing lagged time in one year. These factors in most cases dictate the level of electricity which Libya produces in every year. In other words they affect the level of supply that the producing companies must ensure is availed for smooth operations in various sectors in the economy. (Vagliasindi & Vagliasindi, 2012)

Demand for electricity model

There are a number of models which have been developed in the past by scholars to help explaining the demand for electricity in a number of countries across the globe. The first model is called the Time Varying Cointergrating Regression model in Mexico. (Berndt, 1996) The equation given was

DT=π+γyt+DPT+φzt+ut,

In the equation, DT denotes the electricity demand, YT is the income or the production, pt is the real price of the electricity in Mexico, zt is the variable that helps in the capturing of various components of demand, and ut is the stationary error.

Another model is the modeling and forecasting demand for electricity in Bangladesh: Econometrics Model; in this model there area factors that are listed to be affecting demand for electricity in the country. These include economic factors, environmental factors, demographic factors, factors related to policy change and technological factors. The model specification that is used in the understanding of the concept is C=(f(Price, GDP, Pop, EX)Where C is the consumption, GDP is the Gross Domestic Product, pop represents Population and EX shows a socio-economic and other miscellaneous factors.

The model of electricity supply in Nigeria

This kind of model stipulates the following equation

ES = f (P, GF, RF, TECH, PWL)

The inclusion means that; ES is the electricity supply in Megawatts hours, P shows the price of electricity per megawatt in naira and kobo, GF is the government findings of the electricity in Nigeria, RF is the rainfall quantity per year in terms of cubic meters, TECH is the state of technology which includes data point and time variable, PWL quantity of electricity or power which is lost in an annual basis. (Habib, 2004)

Apart from the above indicated models, there are a number of other models which have been adopted by a number of scholars to help in the understanding of various concepts and the understanding of demand for electricity in their countries. These selected models are in one way or another related to the model that can be adapted to best help in the electricity demand in Libya. Most of the independent variables that have been included are closely related to what is happening.

Implications of the findings for policy and direction for future studies

Policy which is adopted by the government and the concerned companies are very important when it comes to directing and streamlining an economic growth in a country. As stated above an access to a clean and appropriate energy should not be an option to any economy that intends to prosper. Vagliasindi & Vagliasindi, (2012) Electricity is important since it makes it possible for the households and the companies to meet most of their needs. It stands at a central pillar of a millennium development goal. The policy that is adopted should address some of the pertinent issues affecting economies. To most of the developing economies, it has been realized that growth is regarded as a result of high cost of doing business in the country. It is no doubt that electricity is one of the variables that highly affects the expected and real growth in an economy. When the cost of electricity is high then the cost will be transferred to the cost of goods and therefore making life more expensive. Libya is one of the developing countries which even face serious problems when it comes to the construction of few electricity projects in a country. There are a number of implications for adopting a policy of ensuring that there is sufficient electricity and these include both positive and negative concerns;

Unemployment is one of the major concerns in the country with millions of youths failing to secure jobs. Just like other countries in Africa, the nation is endowed with vast resources. The major challenge has been the political willingness by most of the leader’s in the country. When the cost of electricity is reduced then it is likely that most industries will be in a position to create jobs. They will be in a position to involve a number of youths in various lines of production in the economy. (Parker & Parker, 2006)

Increased number of Foreign Direct Investments; the conditions of doing business in a country are one of the major drivers that influence the amount of investors that invest in the country. When the `policy is adopted to ensure that electricity is affordable then the cost of doing business in the country will come down. Incoming of foreign direct investors in country will spur economic growth in the country. (Habib, 2004)

Improved development of other infrastructure- According to Al. Azzam, (2002) there are a number of growth variables that are directly related to the cost and availability of electricity. A policy that ensures that the cost of electricity is lowered in the economy will lead to the growth of other infrastructures like schools, hospitals among others. The availability of electricity helps in opening up the economy to a myriad of investors. It ignites the growth of other sectors.

Reduced costs of electricity will reduce the costs of living in the economy. When the cost of electricity is high then the cost of production will also be high. Robbins & Publications, (2007) High cost of electricity means that the expenses in production are increased. Since the firms are in business to make profit it is likely that these costs will be transferred to the customers. Therefore cheap costs of electricity will result in the lowering of most of the basic products in the economy. This will result into the costs of living to be cheaper than before.

The only negative implication in the openness of the economy means that it will be free to do business in the country. Investors from other nations will have the dire appetite to inject their moneys to the economy. Therefore most of the business in the country will be held by foreigners. This will lead to capital flight from the mother country to the mother nations; it is likely to interfere with the tax base of a country and subsequent development of other important sectors in the economy. Since the growth and the level of development are measured by Gross National Product as opposed to Gross Domestic Product, it will be realized that the nation’s real growth will definitely be affected. (M'CNeil, 2005)

The government of Libya must therefore look at all the available options to ensure that right policy is adopted. All the internal and external factors should be taken into consideration. The costs of constructing major electricity projects should be looked at in comparison to the revenues which s expected to be gotten from it. (Publishing & Agency, 2012)

The right policy should be directed towards ensuring that the supply is enough for all the sectors in the economy. The demand of the companies and the populace should be lower as compared to the supply. It is therefore advised that the completion of the projects should be the main priority if Libya as a country must grow to the greater heights as stipulated in its vision.

Econometric framework for electricity organizations in Libya

The determinants of demand are income, prices of the substitutes, tastes, prices of compliments, population and changes expectations. Habib, M. (2004), Economists refer to the changes in demand as a shift in the entire demand curve. Range in quantity demand on the other hand refers to a movement that occurs along the demand curve when there are indicated changes in prices. These arguments are strongly laid in the major economic principles. It should though be noted that there is an existing difference between changes in demand and the movement along demand.

Quantity of a good is therefore a function of some of the variables which includes prices, tastes among others. Therefore from these arguments it can be asserted that;

x = f (PX, T, C, I, pw, R, E)

Where x is the quantity of the good x, px, is the price of the good x, T, is the taste of the preferences, C, is the population of the consumers, I, is the consumers income and the distribution of income, pw, is the price of other related goods, R, is the rang of goods which are available while E is the market expectations. (Berndt, 1996)

The above equation though applies for the general principle of demand equation and curve. The variables that affect electricity in Libya might be different. According to M'CNeil, P. (2005) the variables and the factors that affect the demand for electricity in Libya are different. It is possible that the above general economics demand equation can be related to the general equation for the demand for electricity in the country. (Berndt,1996)

Qt = f (Pt, YT, NT, IMt, DT, Qt-1)

The above equation can therefore be transformed into a linear equation as follows;

LnQt = a0 +a1LnPt +a2LnYt +a3LnNt +a4LnIMt +a5LnDt +a6LnQt-1 +ut.

Whereby;

A0 is the constant term, a, is the coefficient of the independent variable, I is 1,2,3, Pt is the average electricity price at any particular time in Libyan dinars, Yt, is the real income which is expressed In real Gross Domestic Product, Nt is the number of population in Libya at a particular time t, IMt, value of imported appliances at a particular time t, Dt is the existing difference between the stipulated average maximum and the average minimum on an annual basis at a given temperature time t, Qt-1 is the lagged one year, while ut is the error term given the usual assumptions. (Pilat, 2006)

The preceding log linear equation existing as the constant elasticity equation since the equation indicates that the partial derivative given the fact that the regressor is constant. The main reason as to why linear log form is used, because it presents logical results and is easier when it comes to the analysis. (Al. Azzam, 2002) Log linear form is often used in demand and also in the production function. Robbins & Publications, (2007) the approach as adopted in the study is no doubt informed by a number of studies as indicated and discussed in the literature review chapter. In the estimation of the parameters it is clear that OLS can be used to provide results just like any other regression technique when it comes to the estimation of various parameters. It is also preferred since it has the ability to track and bring accuracy as compared to other applied techniques for regression. Its interpretation is also not complex especially when it happens between variables. (Publishing & Agency, 2012)

At this level it is reasonable to make an assumption that the cross sectional difference when it comes to the consumption of electricity which represents the variation when it comes to the utilization rate and also the adjustment, major estimates which are mainly focused on cross-sectional data are possible being interpreted as the long run elasticity’s whereas others which are based on the time series of data are mainly the measures of mainly short run adjustments. (Costa & Kahn, 2010)

To make it possible and to have real dynamics when it comes to the determination of the demand for electricity, one is in a position to distinguish Qt and Qt* at a specific time where the main presented difference shows the existing constraint in the exact instantaneous through the adjusting of the appliances to specific desired levels which is warranted through the specific changes in variables.

LnQt = a0 + a1LnPt + a2LnYt + a3LnNt + a4LnIMt + a5LnDt + a6LnQt-1 + ut.

Two other alternative adjustment models, which are the flexible distributive lag model and the adjustment model, have also been taken into consideration to help in the understanding of the determinants of demand for electricity in Libya. Robbins & Publications, (2007) the latter takes into consideration the adjustments on annual basis the desired actual appliances approach is gotten in some infinite time as opposed to the other where the appliances approaches though fails to reach the desired level. The former includes similar lag time pattern for the entire explanatory variables and also recognize that is required responding to the specific change in the economic conditions in the country. (Ali, 2001)

The analysis in this paper is informed by the fact that both the imports and temperature change can likely have an effect on the demand of electricity. It is clear that temperature, real income and the prices of other substitutes will influence the demand of electricity in Libya. It can have either a positive or a negative impact. This will depend on the quantity and the level at which it is applied. There is also a serious role which is played by the temperature and other appliances as having great effect in the demand for electricity in Libya. (Ahmed, 2005)

Data for 1980 to 2010

YEAR

Electricity Consumption ( Billion Killowatts)

1980

4.1

1981

4.2

1982

4.5

1983

4.8

1984

5.2

1985

6.0

1986

7

1987

8.1

1988

9.8

1989

10.1

1990

13.4

1991

13.1

1992

13.2

1993

13.3

1994

13.4

1995

13.6

1996

14

1997

14.2

1998

14.5

1999

10.0

2000

11

2001

11.1

2002

12

2003

12.3

2004

13.1

2005

13.5

2006

13.8

2007

17

2008

22

2009

23.5

2010

25.5

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Research Questions

As stated above, electricity plays a major role for any economy to grow. The demand for electricity has been increasing in the country and the trend has kept the government worried. There are a number of factors which have been discussed to be affecting the demand for electricity in the country. The investigations in the paper will focus on investigating some of the determinants of electricity in Libya. The first question that the paper tends to investigate is how and the level of magnitude by which income, population, price, temperature and appliance imports affects the demand for electricity in the country. Price is a major variable in the economy. Economists have argued that when the price of a product increases then its demand will come down and the re verse is true when the prices have gone down. The change in price offers a good opportunity to measure by what level the demand of the product has been affected. An upsurge in population will see the demand for electricity in a country. Pilat D., (2006) Libya has recorded a constant growth in its population since independence and this ha s seen the demand for electricity going up. The electric consumption has been increasing resulting to increased demand for the electric supply. Ahmed, S. (2005) the ability of an individual to afford some of the basic needs fully depends on his/her income. When a number of people are having high income then it is likely that the demand for electricity will be high. Low income earners in the economy will not be in a position to demand electricity. Therefore as the economy attempts to grow so will the populace have the flow of money in the economy? Most of business start ups will require electricity and therefore the level of demand will increase. The availability of the appliances will influence the demand for electricity. (Costa & Kahn, 2010) Most of the electricity appliances are imported from other countries, therefore when the import duty is high then the electricity demand will come down. Finally, economists have also been arguing on the role of temperature on the demand for electricity. Some have argued that when the temperatures are low then the demand for electricity will be high as opposed to when it is high. (Al. Azzam, 2002)

The next question that the paper will attempt to answer is on how there can be improved accuracy on the said demand function when it comes to tracking of the realized demand. Given the fact that there are a number of variables affecting the demand for electricity in the economy a number of quality control measures should be put in place to enhance the level of accuracy on the discussed demand. (Robbins & Publications, 2007)

The other question that the paper will be discussing is on how we can do the comparison on the ability to track the electricity function in Libya in relation to other models which by all standards claim to be tracking the consumption of the electricity in Libya. The paper will adopt a model in a comparison to other models to help in checking on the efficiency of the model and its ability to explain the consumption of electricity in Libya. (Vagliasindi & Vagliasindi, 2012)

The final question that will be explained by this paper is to investigate on whether the econometric models of the electricity demand in Libya is capable of performing a better job when it comes to tracking the consumption of electricity in the country. The discussion in this paper is convinced that the model will offer the best given the fact that it entails some of the major variables which influences the electricity demand in the country.

With these stated questions, the paper holds that there will be a proper insight when it comes to the discussion section. This will help in drawing on a conclusion and recommendation on whether the above stated factors are the true determinants of electricity in the country.

Research Method

A number of research methods were applied in this dissertation. The data applied survey methods to administer questionnaire to the participants. This was done in structural manner to make it easy and simple to answer the questionnaire. The secondary information which was applied was obtained from the historical data which is presented. The literature review discusses some of the information which is already there in the journals. The literature extends further to analyze the content which is presented in the information. The content analysis method assisted in this and discourse analysis assisted in putting the information into focus. Finally, given that the information was quantitative in nature, the structural analysis approach assisted in this to make paper be successful. Given that the information contained biometrical information, the method of analyzing bio- data was applied.

The paper adopted a surveying method whereby a questionnaire was prepared to handle and discuss some of the questions. Simple sampling method was used. Sample is the number of selected units to participate in the survey. The study aims to interviewing a census of 44 which includes head managers, managers, technicians, engineers, technicians and other staff members. Simple random will be applied to sample the study. A simple random sample is defined as a subset of participants picked from a large population. The chance of picking a respondent is on probability and random basis such that they have the same probability of (1) of being picked. Purposive sampling will be used to randomly pick university administration.

In understanding any research paper, it is important that the right method is used in the collection of data. Given the high number of data and large population which is often involved, it is usually advisable that the right sample is taken to ensure that enough and relevant coverage is gotten. The household study as indicated will cover a very large population which is almost similar in terms of it behavior. The study which intends to find out if the electrical pricing policies for instance changing the premium to adopt the use of power during the peak hours is likely to affect the behavior of the consumers with regard to the power usage during peak hours, will require data from the households that uses power in the economy. Given uniformity, the firms will prefer first the use of sampling with specific focus on random sampling. The firm believes that the technique will give a very wide and a good opportunity with regards to understanding the behavior of people in the economy.

Sampling is delineated as a process which is used in a statistical analysis where by a given predetermined figure of given observations will be taken from very large number of population. The specific methodology which is used to sample given large population which will depend of the specific type of analysis which is being performed though will include simple random sampling, observational sampling and systematic sampling. It is required that when one is taking sample from very large population, it is often necessary to consider how the specific sample will be drawn. In order to get a representative sample it is necessary that the sample is drawn randomly. Simple random sample is defined as a randomly selected sample which is obtained from a big sample or even a population that gives all individuals equal chances and opportunity to be chosen. In simple random sample, individuals are picked at random and not more than once to prevent any level of bias that might negatively affect the validity of a particular result of a particular experiment.

The random sampling is derived from the concept of general sampling procedures which is called the probability sampling. The procedures must be included in four major criteria’s which includes;

Being in a position to define the number of distinct samples whereby the procedures can be selected.

Every possible samples will be designed to known the probability of selection

A need to select samples through random processes whereby every sample gets appropriate probability of selections

The method of computing the required estimate should result into a unique estimate for any specific given sample.

Assumptions

Various sample units which are included in the sample should be selected in a random manner from the existing population

The used estimator which must use the normal distribution for the specific bound and the given confidence interval so as to ensure that a correct coverage is given

When the first and the second one fails, then the bound calculated in almost more than two times the standard error will entail true and real value for the population parameter in more than 75% of the presented cases.

Study design

Primary data will be collected from questionnaires that will be filled by the respondents through direct interviews. The questionnaire contained only closed ended questions. Open ended questions will be given to the respondents to help them on the discussion of the topic. The researcher will hand deliver the questionnaires and later pick them. The study will be designed in such a way that during discussions, persons from different departments will be included so that more varied answers can be gotten.

Research techniques

The study will adopt the two techniques which will be used as vehicles in the collection of data. The paper will adopt both qualitative and quantitative methods in the collection of data. Professionals have argued that both methods should be used together so as to ensure that satisfactory results is obtained. Other professional have though argued that such technicalities solutions underestimate the real politics of legitimacy which is often which in most cases associated with the particular choice of any particular method. Despite the fact that a number of professionals have found quantitative appealing, it should be noted that the right technique should depend on the objectives of the study which is being carried out. It has also been seen that the collection of data through the use of questionnaires as being quantitative, observational and interviews are regarded as more of qualitative. It is also important to note that interviews can also be structured and analyzed as a quantitative manner. This happens in scenarios whereby the numerical data are collected in occasions when non numeric answers are coded are characterized in a given specific numeric form. It is also possible to have to have open ended responses which will result in in-depth responses which will result in in-depth studies of specific individual cases. Quantitative approaches are in most cases associated with high level of objectivity while the qualitative approaches are in most cases associated with subjectivity. Quantitative research is mostly concerned with the collection and analysis of data in specific numeric forms. It also put a lot of emphasis on large scale representative sets of data and in most cases is falsely viewed as a tool for gathering of necessary facts. It is unarguable empirical type of research where all the data used are in form of numbers. The questionnaire has designed to be having open ended and closed questions, all of which are structured to make it easier for the researcher to answer the questions formulated above. The calculation which accompanies quantitative data makes it easier for the data to be represented in numerical form. The data is more convincing and simple to understand with an ease to interpret. (Creswell & Creswell, 2009)

The rationale behind adapting questionnaire revolves around objectives and the accuracy of results. The data provided makes it possible for the calculations of means, variances, standard deviation among other important mathematical computations. The method is also preferred to qualitative information since a researcher can compare a number of variables which are accompanied, reducing the possibilities of biases in the results. The questionnaire will also assist in probing the participants on some of the effects of stress and how it can be reduced. Quantitative research applies statistics and mathematical or computational techniques to empirically investigate social phenomena. Quantitative data is always represented in numerical form. The numerical data gives succinct information which helps in answering of the clients questions. (Creswell & Creswell, 2009)

Advantages of Quantitative research,

It enhances greater accuracy, objectivity and validity of results

It gives a proof through the use of means that the data can be replicated in future research.

It makes it possible comparison and analysis of broader of subjects view.

It allows a researcher to have an opportunity to reduce personal biases

Disadvantages

The data collected in most cases is superficial

They are limited since they only give numerical description unlike detailed narrative information.

In most cases data collection is usually carried out in unnatural and artificial environment

Questions developed by the researcher are a time subjected to structural bias. Despite the strengths of the quantitative approach, some researchers have argued that it gives limited information unlike the qualitative approach that gives more detailed information. The data is also regarded as giving artificial information which is not sufficient enough to derive at conclusion.

Qualitative Technique-

This is the technique of gathering of data and is mainly focused on the real significance of various observations which are made in a specific study as opposed to the specific assigned raw numbers. It involves investigative methods which entails interviews and even detailed case studies. It is mainly used mostly in nursing profession and has gained an increased appreciation in the primary care setting. (Creswell & Creswell, 2009)

This kind of technique does not involve numerical information but more of theoretical technique. It involves the use of nominative and the ordinal data. Nominative data often assigns a label to different categories and then the ordinal data besides the data, it includes the rank. The adoption either depends mainly on the primary research questions and also the use of statistical procedures to be used in the process of data analysis. For instance the use of chi-square test is basically used for frequencies while ANOVA test is used in the quantitative approach.

The characteristic of this technique includes the purpose of the study, reality, viewpoint, values, focus, orientation, data, instrumentation, conditions and results.

Advantages

It has the strength when it comes to the covering of the experience of people and the discussion on why things happen the way they do.

It is mainly focused on small groups and therefore less expensive as compared to quantitative technique which requires large data.

It helps in the producing of a more detailed and comprehensive information and therefore helping in coming up with a precise conclusion and recommendation on a study.

According to Creswell & Creswell (2009) It adopts a subjective approach/ information and also the participant observation to help in the description of the context, or the specific setting of the variables which are being investigated and also the precise interactions between different variables in the context. It intends to seek the entire understanding of the situation.

Weaknesses of Qualitative Research

Qualitative method techniques help in the collection of data concerning the specific select group of participant’s feelings and thinking. It is impossible to use the information to make a general assumption about the group.

Qualitative technique does not allow a method that conventionally helps in the collection of statistical data. It should though be noted that it is only a disadvantage if the research question also requires statistical data.

The entire issue of subjectivity of the inquiry results into difficulties when it comes to the validity and reliability of various approaches and information.

It is almost impossible to detect and prevent researcher induced bias which is common in a number of various research studies.

The new scope is mainly limited as result of in-depth and also with the issues of comprehensive process of gathering data in any study.

Sample design

Sample is the number of selected units to participate in the survey. The study aims to interviewing a census of 44. Simple random will be applied to sample the study. A simple random sample is defined as a subset of participants picked from a large population. The chance of picking a respondent is on probability and random basis such that they have the same probability of (1) of being picked. Purposive sampling will be used to randomly pick the individuals for discussions. The samples that will be selected to participate in the study were supposed to be strictly managers, technicians, engineers, technicians and other staff members. The information that will be collected must be thoroughly checked before entering into the system. Only the above listed persons will be strictly allowed to participate in the study.

Participants and recruitment

Participants were drawn from the managers, technicians, engineers, technicians and other staff members. Most of these persons are individuals who are daily involved in the issue of electricity. Apart from having professional involvement, they are also involved in the daily research on the improvement of services which they offer to the public. The professional are involved in the studying of the increased demand of electricity in the country and some of the policies which can be adopted to address them. The engineers who will be interviewed are professionals who will be involved in the construction of the new projects and also with the improvement of the existing ones. They ensure that they are properly managed so as to satisfy the utility of the public. The managers are involved in policy formulation and therefore they have the good rare opportunity to interacting with the data with regards to consumption on daily basis. Other persons including consumers will be included will be few picked consumers from the general market. This group of participants will help in the provision of succinct data with regards to some of the things that influences their need to demand for electricity in their households. The demand that will be experienced and the need to have higher supply in the economy depend on the level of consumption from the customers. The data obtained from them is enough to know the partial factors affecting the increased demand in the economy.

QUESTIONNAIRE

Questionnaire on the Qualitative and Quantitative Methods for

Determinants of Electricity Demand in Libya "Empirical Study for the period (1980-2010)"

Introduction

Let the researcher introduce him/her self and what research he wants to undertake to the said respondents. He/ She can also mention how the findings will be helpful to the respondents

Date ……………………….. ……..Respondent Code/No………………………

Name……………………………………………………………………

Answer by selecting one choice or giving your opinion where possible

1. Do you think there has been increased demand for electricity in Libya?

A. YES

B. NO.

2. Do you agree that the government of Libya has done enough to meet the demand?

A. Strongly agree

B. I agree

C.I strongly disagree

C. Cannot tell

4. What are some of the main factors that cause the demand to continuously increase?

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5. How often has the government of Libya adopted mechanisms to deal with the consistent upsurge in the demand?

A. Regularly

B. Less often

C. Not at all

6. In your view, list some of the determinants of electricity demand in Libya?

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7. Is there a correlation between the income levels of the populace and their demand for income?

A. YES

B. NO

8. What is the relationship between the demand for electricity in Libya and the economic growth?

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9. Do you believe low supply of electricity affects the levels of economic growth in Libya?

A. Strongly agree

B. I agree

C.I strongly disagree

C. Cannot tell

10. In your own opinion what are some of the factors that results into increase in the demand for electricity

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11. Do you believe that consistent and stable electricity supply in the country can lead to improved living standards of the people?

A. YES

B. NO

11. Do you believe that the number of investors in Libya is affected by the electricity demand?

A. YES

B. NO

12. Is it true that the presence of companies constructing different electricity projects in the country will help meet the demand?

A. YES

B. NO

13. What are the various options which are available to the country to help in meeting the demand for electricity in the country?

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14. Do you think the stability that is seen in the country after revolution will help stabilizing the supply of electricity?

A. It affects on a high scale

B. It affects minimally

C. It does not affect at all

15. Do you believe availability of funds is the main cause for low supply of electricity?

A. YES

B. NO.

16. Do you think there are enough competent professionals who can help in dealing with the issue of electricity in Libya?

A. Yes

B. No

17. What are some of the factors affecting the consumption of electricity in the country?

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18. Do you agree the completion of the projects will be enough to meet both commercial and industrial demands for electricity?

A. Strongly agree

B. I agree

C.I strongly disagree

C. Cannot tell

19. Do