Page 39 - Vol 28 Issue 29 2019

analysis energy

Lessons to Be Learnt From Ghana’s

Excess Electricity Shambles

By Samuel Asumadu Sarkodie

for countries that find themselves in a
Tema Gas-fired situation of having too much electricity at
Power Plant in Ghana
any given point. Without careful forward
planning, proper data-driven analysis, and
transparent, competitive, corruption-free
contracting processes, any country could
find itself in the same situation as Ghana.

Emergency power producers
Due to challenges with public financing
of energy infrastructural projects, many
countries - including Ghana - have
been turning to the private sector for
investment in the energy sector. As a
result independent power producers are
receiving much more attention on the
continent.

At the heart of Ghana’s energy
sector challenges were the
take-or-pay contracts signed
by the government. To address
ccess to energy plays a critical role According to Ofori-Atta, plans have been the shortfalls it was facing, it
in economic development. But bad put in place to deal with the challenges
Agovernment policies have affected in the energy sector. A recommendation contracted three emergency
energy security in many developing has since been made to Parliament to power producers during
countries. support the renegotiation of all take-or- the 2014 - 2017 period. The
It is estimated that two out of three pay contracts to take-and-pay. contracting was done without
a competitive process. On
households (almost 600 million people) How did Ghana move from not having top of this the government
in sub-Saharan Africa have no access enough power five years ago, to being
to electricity. Ghana has also had its burdened with a massive energy bill as signed 43 power purchase
challenges. A shortage of generating well as too much electricity? agreements.
capacity led to rationing in 2014 and
2015, with serious consequences for the At the heart of Ghana’s problem was how But the demand for electricity never went
economy. it responded to the power shortages in up at the anticipated rate due to tariff
2014. These hit the economy hard, leading
Nearly five years later the country faces to the mining and manufacturing sectors increases and slow economic growth. As
the exact opposite problem: excess contracting, and unemployment going up. a result, the plants ended up producing
electricity. Ghana’s Finance Minister Ken To address the problem, the government excess capacity. The installed capacity
Ofori-Atta set out the scale of the problem fast-tracked private power plants. The according to the Energy Commission
of Ghana is 5,083 MW, almost double
in his mid-year review budget on July 29. current glut in electricity - as well as the the peak demand of 2,700 MW. Of this,
He said that the problem posed grave cost overheads - can be attributed directly 2,300 MW has been contracted on a take-
financial risks to Ghana’s economy. This is to the way in which the contracts were or-pay basis. This means that Ghana is
because the government is carrying legacy drawn up. contractually obliged to spend money
debt in the energy sector, which threatens for excess capacity that’s not being
to put a huge strain on its finances. Ghana’s experience is a cautionary tale consumed.

AFRICAN POWER Mining & Oil Review Vol 28, Issue 29, 2019 | 39