Ghana’s power challenges and national productivity

As in every other aspect of Ghana’s economic fabric, the demand for electricity power is fast outpacing supply which is evidenced in the increased frequency in outages and now deliberate load shedding in order to ensure that available power is equitably distributed.

How far can Ghana hold out? Is Ghana able to meet the increasing demand for electricity power as its economy continues to expand? Utche Okwuosah attempts finding answers to these crucial questions.

For quite some years, almost a decade now, Ghana has been experiencing spates of jerky power supply which became quite a significant challenge to the NPP administration in the course of their second tenure.

The causes of the challenge were traced to the many years lack of maintenance of equipment which were fast getting obsolete, the seeming lack of vision which failed to anticipate the cost of absolute dependence on hydro power generation and its hydrological shocks, and the growth factor of both Ghana’s population and economy which has driven demand beyond supply.
Stemming the outbreak of this challenge was the last big task that confronted the Kufuor administration. Since the departure of that government till date it has been an engaging task managing the power supply situation to keep both home and industry averagely supplied while efforts continue towards normalising and bettering the situation. The fact of the matter remains that, with the reigning social, political and economic stability Ghana has been enjoying over the past decade, the economy particularly has been growing in leaps and bounds. For instance, the economy experienced an annual GDP growth of 14.4 percent in 2011 compared to 8.0 percent in 2010.

A phenomenal leap in growth, of course, owed to the entrance of the oil and gas sector. Again, spurred by both the sustained strong growth in the mining and oil sectors, it is projected that the real GDP growth for 2012 will increase to about
8.0 percent. Consequently, industries are springing up, the productive sector is expanding and the nation’s population is increasing in tandem with Ghana’s growing prosperity thus overwhelmingly driving electricity power demand beyond what available supply can meet.  Unfortunately, however, the current efforts of the government do not seem to be yielding adequate results soon enough hence the unabating disruption in supply despite the ongoing dedicated reform of the power sector.

 

According to the statistical data from Research and Markets, from 2000 to 2009, residential demand had risen by 61 percent driven by rapid urbanisation and high economic growth, especially as 52 percent of the population now live in cities (up from 42 percent in 2000). Also, industrial demand has grown as well by well over 64 percent on the back of the strength of the mining and the new oil & sectors. Indeed, Ghana’s electricity sector is evidently going through a period of invigorated reform intended to raise total installed power generation capacity by 65 percent or a total of 3,600 MW by 2013. The government has, over the recent years, sustained its reform program of the power sector which is largely aimed at attracting the private sector’s participation.

Hailed in different quarters as the right thing to do as a way of accelerating supply, the Independent Power Producers (IPP) appear not to be in a hurry to capitalise on the government’s “unbundling” of the sector. Speaking recently to a media house, the Chief Executive Officer of the Volta River Authority, Kweku Awotwi, thought that it was too early to jump to such a conclusion. “It’s still early but we know of two or three other IPP’s that are waiting to come in. The Chinese have already started implementing their plans. There are also two other IPP´s, who signed the “off take agreements” with ECG, so we hope to see results in the next couple of years,” he was quoted to have said.

Considered coming too late, involving the private sector remains a smart thing to do so that Ghana does not go the way other African nations have gone which has resulted in complicated and bureaucracy encumbered power generation and distribution system not even helped by government’s inefficient and wasteful monopoly.

“Broadly, I will say the move to encourage new investment has now started but it was a late start however,” Mr. Awotwi had opined. “There was an act passed four years ago to modify VRA, where VRA will just be the power generator and there will be a transmission company (GRIDCO) that will transmit the power, that was an important first step, because it has allowed for a level playing field, allowing others to come in and generate power. That act was put in place in 2006 and…this is an important
framework to attract new IPPs into the system.”

As far back as 1997, government created an independent regulatory agency, the Public Utilities Regulatory Commission (PURC) to set tariffs, initiate policies and generally encourage competition in the sector. And then there came the Ghana Grid Company (GRIDCO), a public sector energy enterprise incorporated in 2006, to power electricity delivery in Ghana. Its advent is seen to have provided a legal and commercial basis for private sector power generation.

Following the government’s creation of enabling investment environment IPP’s participation in the sector is, nonetheless, inching up gradually.

According to the Research and Markets projection, their participatory share will see an increase “from 19 percent in 2000 to 31 percent of total power generation capacity in the country by 2013.”

Despite the cost of thermal power generation, its introduction has come to diversify Ghana’s energy sources, deemphasising the erstwhile traditional dependence on Akosombo and Kpong’s plants with their peculiar susceptibility to climatic fluctuations.

That notwithstanding, it is still estimated that a greater percentage of Ghana’s electricity power supply still come from hydro sources.

 

The Volta River Authority (VRA) established on April 26, 1961, under the Volta River Development Act, Act 46 of the Republic of Ghana, with the core business to generate and supply electrical energy for industrial, commercial and domestic use in Ghana, has built a number of diesel and crude oil-fired thermal plants – like the Aboadze and Kpone thermal plants – to back up the hydroelectric power plants and to meet increasing power demand.

To reduce the high cost incurred through the thermal power generation, Ghana, alongside its West African neighbouring States of Togo, Benin and Nigeria, with the backing of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), invested in the West African Gas Pipeline (WAGP) to supply power plants in the country with cheap natural gas from Nigeria.

This investment necessitated the building of gas-fired thermal plants (Aboadze, Kpone and the Domunli (still under construction in the Western Region power plants) with the aim of having thermal power generation as the main source of electricity power for Ghana in the immediate future. Of course, these investments are also made with the added expectation of gas harvest from the newly discovered Jubilee offshore oil field.

Unfortunately, as much as these concerted efforts are being made to meet Ghana’s most crucial developmental need, the incidence of the rupturing of the West African Gas Pipeline occurred to cause a severe setback in government’s plans. Gas supply was disrupted and this, consequently, affected electricity generation thus plunging the nation back to the era of load shedding and incessant power outage. This is aside from the impact it is having on government’s budget as an unplanned expenditure in the purchase of petroleum for powering the thermal plants.

Granted that WAGP authorities have said that full supply would be restored by December at the satisfactory conclusion of repair works on the damaged pipeline yet, it appears that the assurance is hard to believe because of failed deadlines in the past. Hence, the public have been given different and conflicting dates by different government officials on the expected time electricity supply would be restored to normalcy.

Early in the month of November, at an interaction between the VRA Chief Executive and senior editors, Mr. Awotwi reiterated his assurance that the end of load shedding and power supply interruptions were nearly at hand.

The journalists were told that the repair work which began on the damaged WAGP pipeline in September was nearing completion and that Gas was expected to start flowing by the end of this.

Further details spoke of all six units in Akosombo running at full allowed capacity, as well as the three units in Akuse which were running at full allowed capacity.

 

While one unit in Akuse was out for emergency repair work, all four thermal units in Aboadze were reported to be running at full capacity, including the Steam turbine in Aboadze which was running and producing 50 MW of power.

“Total available capacity now is 1601MW. Peak demand now is 1705MW, leading to a deficit of 104MW,” according to VRA’s report which was presented to the Editors.

The report said that Takoradi 3 (T3) is running with 21 MW of power available, and expected to ramp up to 80 MW by the end of November, and that “CENIT is expected to run by mid-November, once it gets crude oil. Full capacity of these two projects is expected to add a total of 240 MW by year end.” With an assurance that there was “sufficient crude oil to run plants in Aboadze.”

“Ghana has been hailed as “The Gateway to Africa”,” the politician and energy expert, Goosie Tanoh, had said at the last, 3rd Policy Fair Dialogue Series last April.

“Over the past decade alone, we have witnessed the burgeoning growth of some very important industries. Our communications network is now one of the best and most affordable in Africa. Our roads and transport system, although still work is in progress, has seen some massive expansion in recent times. Even the educational sector has enjoyed some much needed boosts lately and is churning out more skilled manpower than ever before.
“There is however, one major area in which this country has been slow to achieve the desired growth. Sadly, this is also one of the most fundamental catalysts to any country’s rapid industrialisation and subsequent development. I speak of course, about Ghana’s Energy Sector with particular reference to electrical power generation, transportation and distribution.”

Those words echo today with reverberations that appear to be probing any claim to great achievement in meeting the nation’s dire need for electric energy. Really, the situation is a question of check and balances. Thus, one could say that, in the past four years government appears to have made efforts to see that it met its own set goals in making electricity power supply available to Ghanaians yet, if today, both homes and industry are still being denied constant supply of the same electricity power, would one find justification in concluding that the nation’s electricity need has been met? In the recent Association of Ghana Industry’s Business Barometer, poor power supply emerged as the topmost
constraint to the growth of businesses in Ghana.

“According to the respondents, the combined effect of frequent power outages and regular power surges from July-September, 2012 has resulted in an increase in the unit cost of production.” That is how worrisome the power supply situation has become firing the hope that government would, as a matter of urgency, facilitate VRA in all ways possible to meet the country’s need for electricity “if the country is to attain upper middle income status in the next three years.”