Building a reliable power supply in GhanaDecember 9, 2021
Osmani Ayuba, managing director of NEDCo, talks to The Energy Year about the company’s role in expanding electricity distribution in Ghana and boosting the electrification rate while securing profits for a sustainable business. A subsidiary of the Volta River Authority (VRA), NEDCo is responsible for the distribution of electricity in the north of Ghana.
How is electricity distribution managed in Ghana?
The Electricity Company of Ghana (ECG) used to manage Ghana’s distribution entirely, but due to the power reforms the government has decided to differentiate between the country’s southern and northern regions. In 1987, the Northern Electricity Department (NED) was formed as a distribution department of the VRA. In May 2012, NEDCo was operationalised as a wholly owned subsidiary as part of the power sector reform. NEDCo has its own managing director and board of directors separate from the VRA, but the VRA remains our parent company, generating power and supplying it to us.
GRIDCo manages the transmission of electricity. ECG operates the distribution in the south, which is 36% of the geographical area of Ghana, while NEDCo distributes electricity in the north, which covers about 64%. Even though we cover 64% of the geographical area, our total energy consumption is 10% or less, while ECG covers the remaining 90%.
What should be Ghana’s top priorities to facilitate the president’s target of achieving a 100% electrification rate in the country?
The electricity access rate for the entire country is about 87%, but for the area that NEDCo covers, it’s under 70%. The government needs to encourage more of the One District, One Factory projects because these are going to be high-consuming factories or processing plants that will need a reliable power supply to operate.
Even though NEDCo’s coverage is big, the consumption within it is very low due to low industrialisation in the northern part of Ghana. We need to have more industries in the north that will consume more power. Currently, we have many residential customers, and their tariffs are very low. They are mostly lifeline customers, who consume around 50 kW or less.
At the same time, we need to extend electrification to every local corner of the country, meaning that we would need a reliable, safe and stable electricity supply. We need to build more substations and upgrade our lines. In this regard, we are about to sign an agreement with the Korean government for around USD 68 million to build six substations.
If this agreement is signed and approved, it will bring investment into the network and provide more reliable electricity, contributing to the national electrification target.
What are the biggest challenges for NEDCo in terms of becoming profitable?
The three most important cost elements, which make up 90% of our overall operating costs, are the power purchase cost, the transmission service costs and salaries and wages. The main challenge here is that we do not determine the price of the power we buy or sell or the transmission service charge. The Public Utilities Regulatory Commission (PURC) sets the prices for us.
If you look at the overall energy mix, we have sources like the thermal power plant, which uses diesel and is very costly to operate, and we have solar and hydro energy, with hydro being the least expensive of all. If we were to have greater allocation of hydropower, it would bring the cost of our power purchase down, and PURC would be able to set a price that would cover almost the full cost of operations, making us more profitable.
What are the main differences between NEDCo and ECG regarding operational costs?
Our cost of operations is very high compared to ECG because they have concentrated customers. It doesn’t cost them as much as it costs NEDCo to serve our customers. When you have to travel long distances and extend electricity and maintain the line to serve just a few customers, it will cost you more. If there is a fault in a very remote area, you have to trace the fault, which will cost you more in terms of fuel consumption and travel time. This is because the customers in the NEDCo operational areas are very dispersed and those of ECG are more concentrated.
How are you planning to improve power reliability within the sector?
We must have the capacity to generate and distribute reliable power supply because we provide services to the customer. If the customer does not get this, they don’t feel motivated to pay for the power. We can ensure reliability by working with companies that can build factories that will produce transformers, cables and meters in a cost-effective manner, taking advantage of the key players in the market.
Meters need to work properly; if the customer feels that the meter is old, dilapidated and not giving the correct reading, they feel they’ve been cheated. We need new meters that will accurately measure consumption, gaining the trust of the consumer.
What is NEDCo’s strategy for fostering greater investment?
Investments should be undertaken when they result in good returns or payback. We do project appraisals for investments, with respect to meters, transformers or substations. We must also demonstrate that we can collect money for the services we provide, ensuring our ability to repay the investment. We propose replacing credit meters with smart split meters, where customers pay in advance to get the power, which reduces power theft as well.
Credit meters are put on customer premises, and we don’t have access to check them, so they can be manipulated or bypassed. Smart split prepaid meters are put on a pole, where there could be as many as 20-50 meters, meaning that customers don’t know which one is theirs. They would only have the customer interface unit (CIU) to load their units. This will seriously reduce, if not eliminate, power theft, ensuring our revenues and our ability to payback for the investment.
We are open for investment partnerships, be they local or international, especially the concessionary ones where we can get very attractive interest rates and long-term repayment because it will take us a long time to recoup our investment. We need to bring in expertise who will transfer knowledge to our staff.
Are you capable of exporting power in the West Africa region?
Our mandate includes exporting power to the countries neighbouring our various operational areas, such as Burkina Faso, Togo and Côte d’Ivoire – this last market being the only one that we supply directly. Burkina Faso and Togo are supplied by the VRA, but they use our distribution lines, and we get paid for maintaining the lines.
What are NEDCo’s long-term objectives?
We have a five-year strategic plan for 2021-2025. We must satisfy our customers by becoming their first choice. We plan to offer a reliable and safe supply of electricity, and we will need infrastructure that can support the service delivery. We also want to ensure that our staff is well trained in their field because safety is critical in our work; if you make a mistake, it could cost your life. We don’t compromise on that, and we want our customers to have a high level of safety consciousness.
One of our goals is to have revenue by the fifth year that is, at the very minimum, equal to our costs. Government companies shouldn’t make losses when there is a potential to make a profit.