Ghana’s electrification rate as of 2019: 83.5%
Target year for full electrification: 2030
Ghana’s power sector expansionJanuary 7, 2022
As Ghana shifts to regrowth after suffering pandemic-related economic losses, emphasis is being put on revamping its power generation sector to boost electrification. However, large investment gaps in the development of the transmission system, unstable contracts with power producers and unbalanced policies have remained key hurdles. Now, the government is implementing a plan to turn the sector around.
It is expected that Ghana’s power generation capacity will sit at 5.33 GW by the end of 2021. While existing capacity will meet foreseen demand in 2022 and 2023, the current 18% reserves will not cover increased demand by 2024. Peak electricity consumption has risen steadily over the past five years, with an annual growth of around 10.3%. Total demand including losses in 2020 rested at 19.7 TWh. By 2025, the country will need to have added 51 MW of additional power generation capacity, and 392 MW by 2026. Development of the sector is thus imperative.
Ghana’s transmission network, which boasts 7,200 kilometres of lines and 65 bulk supply points, has suffered from neglect due to internal delays and inability to raise capital. Losses in the power distribution grid are expected to be around 5.1% of total production, with 25% of electricity misplaced in the retail section due to poor infrastructure, theft and commercial losses.
Additionally, tariffs remain high in the country, averaging around USD 0.16 per kilowatt compared with USD 0.11 in neighbouring Côte d’Ivoire. This has discouraged investment into the country’s electricity network.
POLICY REFORMS: The Energy Sector Recovery Programme (ERSP) was put in place in 2019 to boost the country’s ailing power supply through an active five-year plan. Key elements are renegotiating unbalanced power purchase agreements to reshape the sector’s financial viability and growing and modernising the transmission grid. As part of the ERSP, a new gas metering system is being developed to reduce losses and theft. While the plan is ongoing, it has been met with bottlenecks due to the pandemic.
In 2020, the government paid more than USD 1 billion to independent power producers (IPPs), along with USD 462 million paid by the Electricity Company of Ghana. Of this, USD 500 million was paid forward for unused electricity. A government negotiating task force, established under the Energy Sector Recovery Task Force, is in consultation with seven IPPs and its gas suppliers to redraw the take-or-pay contracts that led to this drain in spending.
To smooth negotiations, the state implemented a tax of USD 0.30 per litre on petrol and LPG and a slightly lower tax on LPG earmarked for compensating IPPs. Final contracts are expected to be redrawn by the end of 2021. According to the IMF, the government stands to reduce electricity costs by 30% through settlements. However, the task will involve refinancing arrears of IPPs at below-market rates.
In April 2020, the state introduced a new cash waterfall mechanism designed to equalise distribution of tariff revenues on a prorated basis, with tariff revenues from all distribution companies to be included in the mechanism. The move is largely seen as positive, although it has put cashflow stress on state-owned enterprises. Additionally, new bonds under the protection of fuel and electricity levies were introduced under the ERSP to finance legacy debts related to the Energy Sector Levies Act which stood at USD 1.23 billion in April 2021.
The ERSP has already seen returns. By the end of 2020, the government managed to save USD 5 billion by relocating Karpowership Ghana Company’s floating power plant and reaching agreements with CENIT Energy and Cenpower Generation Company. For the future, Ghana’s excess gas supply is also being looked at to further fund development of its power generation sector and aid the recovery programme.
INFRASTRUCTURE WORKS GREENLIT: Projects to revitalise Ghana’s National Interconnected Transmission System are already underway. In 2020, disruptions in the network were common due to the network’s single circuit radial lines, which need to be maintained or replaced. Electric transmission company GRIDCo has outlined major revamps of its network, and while implementation of these projects has been slow, much has already been done.
The 161-kV Volta-Achimota-Mallam transmission corridor is the most used in the country, supplying power to Ghana’s capital and its surroundings. However, its infrastructure dates back half a decade. 1 Planned works on the system include renovation of towers and lines. Delays caused by lack of payments from the African Development Bank and project management concerns have stalled its completion.
Works are also being done on the last part of the 330-kV Central Transmission Backbone between Anwomaso and Kintampo. The remaining infrastructure will see at least 100 MW exported to Burkina Faso when complete. Delays in finishing the project have put severe strain on the 161-kV Anwomaso-Kumasi line. The project will rely on assistance from the state and the African Development Bank to get back on its feet.
GRIDCo expected four projects to come on line in H2 2021, including works on the 330-kV Anwomaso-Kintampo, 161-kV Volta-Accra East-Achimota and 161-kV Achimota-Mallam lines, as well as installation of the 34.5-kV Pokuase station. Other projects, such as the Kasoa bulk supply point, are also expected to finish soon. These upgrades will increase voltage and help maintain a more stable supply of electricity for both citizens and industry.
In 2019, 83.5% of Ghana’s population had access to electricity, with full electrification targeted for 2030. Supplying stable electricity to more of Ghana’s residents is expected to equalise access to job markets and other socioeconomic opportunities and replace reliance on petrol, coal and wood in rural areas to lower the country’s carbon footprint. If all goes well, supply will meet demand as Ghana steps into its next stage of development.