Press Briefing On Power Sector Priorities For Government’s Action

About Press Briefing

 The efficient management of the power sector remains significant for Ghana’s economic growth and development, and the recovery of the economy from the impact of the Covid-19 pandemic.

To achieve these, there are significant opportunities and challenges that will require particular focus and attention by the government.

 

Details:

ACEP on March 11, 2021, held a Virtual Press Briefing during which it reviewed the sector, highlighted the issues that require priority attention and proposed some critical actions that should not be missed in the policy direction of the government. These are as follows:

Power Generation

Installed generation capacity significantly increased from 3,656MW in 2015 to 5,172MW in 2020. Dependable generation capacity also increased from 3,359MW to 4,695MW within the same period. This increase is accounted for by the addition of the following generation plants:

  • 250MW from Ameri
  • Additional 225MW from Karpowership to increase its capacity to 450MW.
  • 370MW from AKSA
  • 360 MW from Cenpower
  • 360 MW from Asogli Phase II (180MW in 2016 and an additional 180MW in 2017)

In addition to these conventional power systems, two on-grid solar projects were commissioned. These are the 20MW BXC Solar and the 20MW Meinergy plants. While both installed and dependable generation capacity increased significantly, peak demand did not increase proportionally to consume the generation capacity. The peak demand in 2019, for example was 2,804MW, leaving an excess capacity gap of 1,891MW on paper. Government indicates that it pays about US$40 million a month for the excess capacity.

Specific actions required:

  • Government must provide information on the excess capacity based on the declared availability for each of the plants for which excess capacity charge is paid. This would improve the credibility of government’s claims on how much is paid for excess capacity.
  • Government should prioritize the conversion of single cycle plants, particularly the KTPP and Ameri plants which are still in the early stage of their lifecycle, to combined cycle plant to improve the production and cost efficiency of the plants to reduce consumer tariffs.
  • Government should be transparent about the never-ending negotiations of PPAs and ensure that they are meticulous to avoid judgement debt for energy that is never consumed by the taxpayer.

Renewable Energy Generation

Government’s action on renewable energy has been negatively impacted by the excess capacity burden faced by the government. As a result, the government has extended its suspension of renewable energy PPAs to licenses for embedded generation (private arrangements between renewable energy suppliers and consumers). This is aimed at sustaining demand for grid electricity to account for the excess capacity over time even though increasingly renewable energy is becoming a more competitive option for small businesses.

Specific actions required:

  • Government should immediately lift the suspension of the issuance of licenses for embedded generation. In the interest of climate action and the energy transition, government should be seen encouraging the penetration of renewable energy instead of impeding it.
  • Government must be more focused on ensuring the regulation of standards for renewable energy technologies rather than the economic choices of businesses and power consumers.

 

Fuel Supply for Power Generation

Domestic gas production has increased with the delivery of TEN gas in 2016 and Offshore Cape Three Points (OCTP) in 2018. OCTP has a contractual volume of 180mmscfd but was delivering 60mmscfd until 2020 due to inadequate demand in the West, where the gas is located, and the delays in delivering the infrastructure to allow the reverse flow of gas from the West to the East of the power corridor. Nigeria gas delivery has also been relatively stable to complement domestic gas with an average flow rate of 60mmscfd in 2020.

Specific actions required:

  • The priority for Ghana must be the optimization of its domestic gas and the suspension of LNG importation plans. This will reduce the take-or-pay commitments, reduce pressure on the budget and provide incentives for investments in domestic gas resources.
  • GNPC should be subjected to strict proof of the identified market that warrants the risks of importing LNG.
  • Ghana should negotiate with Nigeria Gas to use the Floating Storage Regasification Unit (FSRU) which was delivered at the Tema Port last year as a buffer to smoothen gas supply through WAGP. The cost of the FSRU can be accommodated in the gas price which is less burdensome than adding the cost of the commodity (LNG) which in all likelihood is a surplus requirement.
  • If by 2022, Ghana is unable to consume the OCTP makeup gas, some people should be held criminally liable for deliberately causing financial loss to the state.

 

Power Transmission Challenges

The problems with the transmission sub-sector have received less attention in the discussions around the power sector challenges faced by the country. It is important to bring these issues into a proper perspective to ensure they are addressed because of the threats they pose to the security of power supply in the country.

Specific actions required:

  • The sustainability of GRIDCo depends on a reformed power sector that pays for the investments in the transmission of the power sector. The fiscal position of government makes it difficult for the budget to continue to sustain investments in the transmission system. In the short term, some parts of the ESLA proceeds should be made available for investment in critical equipment in the transmission system.
  • Ongoing upgrade works should be expedited to relieve power consumers of the frequent outages and low voltage currently being experienced.

 

Power Distribution Challenges

The distribution challenges in Ghana’s power sector are widely known and has been an area ACEP has written extensively on. These challenges are deeply rooted in the inefficiencies in the power distribution system. The inefficiencies in the system are attributable to obsolete distribution infrastructure.

Specific actions required:

  • Government should immediately revert to a transparent process to attract private capital into the distribution sector. If this is not done in the short to medium term the entire power sector would be in serious distress unless government is willing to sacrifice other socio-economic investments to continue to unsustainably prop-up the power distribution sector.