Hydroelectricity consumption, power losses and economic performance in Indonesia

Abstract

In general, the usage of renewable power plants for electric systems is expected not only increased over the year to meet electricity demand but also can support economic condition in a related place. In this paper, causality relationship between electricity consumption particularly from hydropower plant (HEC), losses of the power system (PLOSS), and economic growth (GDP) in Indonesia was investigated using statistical method. Yearly data from year 1985 to 2014 were used in this study. From results of unit root test, examined variables (HEC, PLOSS, and GDP) were stationary at first difference as indicated by their values which have significance at 5% level. Co-integration results using Johansen test to identify long-run relationship between observed variables confirmed that there is 1 co-integration equation in the model. This indicated HEC, PLOSS, and GDP have long-run relationship. Next determining causality direction using Granger test shown that HEC and PLOSS have only unidirectional Granger causality running from HEC to PLOSS. A similar finding for causality direction between GDP and PLOSS. For HEC and GDP, they have bidirectional causality which means HEC influenced GDP condition and vice versa. Resulted information assisted in making electricity energy policy from hydropower plant (HPP) which is potential in Indonesia as an indicator to get high economic performance.