Keeping the Lights Turned On: Making Sense of Ghana’s Power Sector
During Ghana’s rainy season, we are assured of two things: random, dramatic downpours and almost equally indiscriminate dumsor, or “power outages”. Why are the lights going out again and what’s Ghana’s long-term power strategy?
Damaged conductors: Ghana’s electricity distribution company (ECG) has announced that residents will likely experience power outages because of damage to electrical conductors. In effect, force majeure, as rainstorms destabilise trees and billboards, causing them to fall onto conductors. Residents are being cautioned to be extra vigilant and to call ECG hotlines if they spot fallen or “sagging conductors”. The replacement of damaged power lines and conductors isn’t cheap; earlier this year the ECG spent close to GHC 300,000 in the Ashanti Region on such replacements[1].
Signing of “take or pay” contracts: Government is straining under the burden of “take or pay” contracts that were primarily signed during the 2014-16 power crisis (official “dumsor” period). These contracts were mostly agreed to by underqualified, unauthorised government actors and the consequences are severe. The consensus is that Ghana is going to pay excessively for power it does not use. Ghana is hugely overproducing energy (4,399MW vs. a peak demand of around 2,400 MW[2]). Conservative estimates put the figure at US$500m a year while a diplomatic source took a grimmer view, sharing with us that they thought that US$12.5bn over 5 years was more like it.
Settling debts: The major state actors at all levels – generation (VRA), transmission (GRIDCo) and distribution (ECG) - have suffered from years of indebtedness, with government being a major creditor and the knock-on effect of under-investment in necessary infrastructure. The latter has led to a situation where distribution losses are as high as 25%. But in May 2020, government announced that it had paid all outstanding debts to ECG which had stood at GHS 2.63 billion in December 2016. Government authorities now say that they have a GHS 500 million credit with ECG[3].
Moratorium on PPAs: As a result of this excess power, government has placed a moratorium on the signing of any new power purchase agreements (PPAs) that allow private companies to sell to the national grid.
Connecting rural communities: Government has reiterated its commitment to achieving universal power coverage though it has missed its original target of achieving this by 2020 (currently at around 85%). At the Ghana Renewable Energy Fair in Accra late in 2019, a representative from the ministry of energy [1] [2] called for investment in (primarily non-thermal) mini-grids to connect rural and island communities – these do not require a PPA. Government has also put out a call for consultants to assist in scaling up the country’s renewables program, of which mini grids are a central part[4].
Nuclear energy by 2030: Government has this week reiterated its commitment and progress towards a reliable and sustainable energy supply through nuclear over the long term[7], which has already drawn in interest from the US, Russia, China and France. Ghana has been steadily readying itself for nuclear power generation within 10 years, having met 19 requirements by the International Atomic Energy Agency. Ghana’s government believes this is a long-term solution to the country’s electricity woes for households, industry (bauxite refineries for instance) and for agriculture, particularly as fossil fuels, the energy source for thermal power, will be on the decline from 2030[5].
Outlook
In the immediate, the reparation of damaged infrastructure within the context of Covid-19 will likely mean a more slowed-down process, resulting from more limited movement and disrupted supply chains. That said, CEO of ECG, Kwame Agyeman-Budu, has spoken of his intention to procure cabling from local producers such as Tropical Cables, in line with government’s local content drive.
That government has repaid its debts dating back to 2014 is a step in the right direction yet as to whether government will “pay as you go” with ECG as it consumes energy, is questionable, especially when there will be so many other competing financial pressures on the state. Already, the government decision to heavily subsidise electricity bills for consumers for three months from March 2020 as a concession in light of the pandemic, will cost GHS 1 billion.
At the current rate of demand growth (10% pa), peak demand will double in about 7 years. This means that there will be a need to start planning towards increasing production capacity over the next 18-24 months, given the time needed to plan and develop utility-scale projects. Ghana’s Energy Commission has stated there are some projects underway but that further capacity will need to come online by 2024.[6]
Interest in Ghana’s nuclear ambitions from global players will only intensify, as Ghana looks set to become only the second country on the continent to have nuclear energy after South Africa. But scrutiny of the small print and the implications of Ghana going nuclear needs broad stakeholder dialogue and critical thought[8]. A former Ghanaian IAEA employeewith whom we spoke lauded the intent of government but raised concerns about a lack of preparedness around the security of nuclear sites, waste materials and the geopolitical impact of choosing Russia as a technical partner.
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[1] https://www.businessghana.com/site/news/general/208464/ECG-replacing-destroyed-Dagomba-tower-line
[2] https://www.usaid.gov/powerafrica/ghana
[3] https://www.ghanaweb.com/GhanaHomePage/NewsArchive/Energy-sector-is-gradually-getting-out-of-the-woods-Amewu-956851
[4] https://www.pv-magazine.com/2020/02/10/new-impetus-for-ghanas-solar-ambitions/
[5]https://www.ghanaweb.com/GhanaHomePage/business/Government-targets-1GW-power-from-nuclear-sources-979267
[6]http://www.energycom.gov.gh/files/2019%20Electricity%20Supply%20Plan.pdf
[7]https://www.ghanaweb.com/GhanaHomePage/business/Ghana-moves-to-generate-one-gigawatt-nuclear-power-by-2030-982189
[8]https://www.iaea.org/newscenter/news/is-africa-ready-for-nuclear-energy