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De-lighting Ghanaians, the state of Ghana’s power sector

Aug 18
18:08 2014

The Electricity Company of Ghana (ECG) has announced a new load shedding plan on Saturday. The announcement is expected to enable utility consumers plan their activities to efficiently use power while the bigger problem of adding more generation capacity to the national grid is being dealt with.

Ghana’s energy sector has been bedeviled with the inability of power producers to meet demand. The current state of the sector dates back to 1982, when drought resulted in a decrease in capacity from the Akosombo Dam, the main power plant. The situation got better in 1986, recurred in 1994, 1998, 2006 and has been worsening since 2010.

According to the Ministry of Energy, Ghana’s current electricity demand stands at over 2000 megawatts (MW) and estimates an annual capacity additions of about 200MW.

In the past 15 years, Ghana has added about 1,000 megawatts (MW) of thermal generation capacity. As a result, Ghana’s current generation capacity of 2,125 MW is made up of about 50% hydro and 50% thermal plants. Nevertheless, inadequate and unreliable power supply remains a major constraint to future economic growth.

Electricity demand which is growing at about 10% per annum. It is estimated that Ghana requires capacity additions of about 200MW to catch up with increasing demand in the medium to long term.

Ghana’s total installed capacity is 2884.5MW but electricity supplied doesn’t meet demand resulting in the ongoing power crisis, called dumsor.

Ghana’s Power Problem

Dumsor, according to research, is costing huge loses for the country. According to Databank Financial Services Ltd, the power outages compelled companies to incur unplanned operating costs of about $62 million per month or $744 million per annum due to the use of privately acquired generators.

When President John Mahama commissioned Ghana’s second largest hydroelectric generating plant at Bui in the Brong Ahafo Region, he declared that the country is on its way to become a major producer of power in West Africa.

The $622 million Bui Hydroelectric Dam project has an installed capacity of 400 megawatts of electricity but it’s currently producing on 90 megawatts of electricity.

The main problem with Ghana’s power sector is not installed capacity but the inability of the plant to operate at full capacity. The  existing power plants are unable to attain full generation capacity as a result of limitations in fuel supply owing to rising fuel prices and uncertainty in rainfall and water inflows into the hydroelectric power facilities.

There have been several promises and timelines given by various governments since the power crisis. However, the problem persists and has since attained a trademark status.

The problem has been with Ghana for decades. According to a recent World Bank report, Ghana has the right energy sector policies but is failing to implement them. If the situation persists, it may take years – maybe a decade – before a lasting solution is found.

Power and business

The toll of the power crisis on business has been huge. The average operating costs of businesses have gone up appreciably.

The 2010 Wholesale Power Reliability Assessment report estimated that Ghana loses between 2 to 6% of GDP annually, not including a number of indirect costs of lost economic output, due to insufficient wholesale power supply. Thus, the economic costs of inadequate power supply cannot be underestimated.

The president of the Association of Ghana Industries (AGI,  James Asare Agyei, says businesses in the country are gradually crumbling as a result of the never ending energy crisis facing the country.

According to the MP for Obuasi West constituency, Kwaku Kwarteng, the industrial crisis in Ghana currently is due to the power crisis. In a statement, he cited the troubles of Anglogold Ashanti – Obuasi, Tema Chemical Ltd, Super Paper Products Ltd, Blue Skies Products (Ghana) Ltd in Nsawam etc for laying off staff and/or shutting down completely because of the situation.

Solutions?

The power crisis has been with Ghana for more than a decade. Over the period, various governments have promised solutions but the problem keeps getting worse.

In 2007, Ghana sought help from Nigeria and Cote d’Ivoire to the tune of 200 MW through the West African Power Pool (WAPP) arrangement.

The $1 billion West Africa Gas Pipeline Project is generally believed to have the long term solution to the power crisis. The pipeline is expected to provide regular affordable gas supplies to power Ghana’s thermal plants. However, the project has failed to deliver and has necessitated in Ghana finding its own localized gas solutions.

Solving Ghana’s gas problems has not been without the usual political swings. Politicians have sought to score quick points with solutions and have promised, ‘delivered’ and largely disappointed the populace.

An energy policy think-tank, Africa Centre for Energy Policy (ACEP) wants Ghana to declare a three year power crisis, to allow room for government to deal decisively with the over 30-year old problem.

According to ACEP, this declaration has become necessary because of  the consistent failure of government to meet deadlines for ending the power crisis.

Barely a year after a World Bank report on the energy sector made far reaching recommendations for reform, prospects for the power sector remain bleak and could get worse before things get better.

According to Sunil Mathrani (Senior Energy Specialist at the World Bank Ghana office) the quantum of debt and the interlock of debt of ECG,GRIDCO, VRA and Ghana water are seriously dragging down the sector and government should seriously look at this problem and this has gotten worse since a year ago, this is the crux of the matter.

Power generation, distribution, tariff increases and consumer satisfaction

The Volta River Authority (VRA) is the main power generator in Ghana. Currently, VRA contributes 75% of the total generation in Ghana.

The Ghana Grid Company (GRIDCO) provides “open access, non-discriminatory, reliable, secure, and efficient electricity transmission services and wholesale market operations to meet customer and stakeholder expectations within Ghana and the West African Sub-region, in an environmentally sustainable and commercially viable manner.”

The Electricity Company of Ghana (ECG) and Northern Electricity Distribution Company (NEDCO) retails electricity to final consumers.

The ECG over the years has generally been the most chastised entity when it comes to the power issues. Common names assigned the institution include Electricity Comes & Goes (ECG), Either Candles or Generators etc.

One may argue that if power is not supplied to the ECG, it would not be able to distribute non-existent power and must be spared the outrage.

However, a 2013 Energy Report published by the World Bank cited ECG for contributing to the ongoing power crisis.

ECG is one of Ghana’s largest and most important state-owned enterprises, as well as one of the largest power utilities in sub-Saharan Africa. It has over 1.8 million customers, 5,600 staff members, and annual sales of about US$800 million.

The total consolidated loses at ECG is over 30% of general output. However, several of the factors responsible for ECG’s poor financial condition are within ECG’s control. To begin with, ECG’s distribution losses (technical and nontechnical) remain very high (27% in the second quarter of 2012, of which 16% were non-technical). ECG does not earn any revenue for this “lost” energy, but has to pay to buy it.

In 2013, the Public Utilities Regulatory Commission (PURC) gave the ECG performance targets to achieve to ensure efficiency in the system. Among them, the ECG was to reduce technical and commercial losses to meet the commission’s benchmark of 21% for distribution companies. This target has since not been met and the losses continue.

Powering Ghana, the way forward

 For a country whose demand is less than installed capacity, ensuring uninterrupted supply of power should not be much of a problem. However, Ghana is in this situation because of the inability of the power plants to operate at full capacity due to low levels of water and inadequate fuel supply.

The current energy minister, Emmanuel A. Kofi Buah, has promised an increase of 1000 MW by next year when the Ghana Gas Company begins full operation.

The World Bank believes Ghana has the right power policies but is failing to implement them and run the sector efficiently.

According to the Bank, the “solutions to the sector’s problems are well known; the challenge is to carry them out.”

“Proactive leadership of the energy sector, with a focus on efficiency and timely delivery, is crucial to Ghana’s ambitions for economic growth.”

Until then, Ghanaian power consumers would continue to swing in uncertainty while the crisis persists.

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