TOGY talks to
How to power up GhanaNovember 14, 2018
Harriette Amissah-Arthur, executive partner at Arthur Energy Advisors, talks to TOGY about the electrification of the country, the impact of new gas projects coming on line and the challenges posed by power tariffs. Arthur Energy Advisors is a power sector consulting firm and authored the Ghana Grid code.
• On power tariffs: “Ghana’s power sector is burdened by huge debts largely as a result of high cost of generation, high cost of service delivery, non-cost-recovery tariffs and inability to collect revenue. It is clear that the power sector can no longer just demand high tariffs and expect the consumers to pay.”
• On gas supply: “If the production from the Sankofa field translates into security of fuel supply at competitive pricing for the Ghanaian power system, generating revenue from the excess gas resulting in the gas industry becoming a net revenue generator, then Sankofa will help. ”
• On electricity access: “Achieving universal access by 2020 is possible since Ghana’s electrification rate is very high, 90% plus. The real task is how electrification can translate into economic and social gains for the people and the country.”
Most TOGY interviews are published exclusively on our business intelligence platform, TOGYiN, but you can find the full interview with Harriette Amissah-Arthur below.
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The Ghana Grid code is currently being reviewed and updated. Is that to take into account Ghana’s future energy needs?
That is one of the reasons, along with increased interest in renewable energy. Ghana’s first grid code came into effect in 2007, and after 10 years of operations it was time to incorporate lessons learned and new developments in power system operations worldwide to improve on operating protocols and procedures.
With the passing of Ghana’s renewable energy act in 2011, there has been a lot of interest in renewable energy among the investor community, hence the need to review the current grid code to accommodate the peculiarities of renewable energy for smooth integration of future shares of power generation from variable renewable energy sources (i.e. solar, wind) in the national grid.
AEA has just completed a study of power sectors in five countries, including Ghana. The assignment identified a number of issues, most of which were cross-cutting and affecting the efficiency, performance and sustainable service delivery by the selected power utilities and recommended appropriate remedial actions for consideration and redress.
The study revealed that in most cases there was substantial debt accruing to the sectors as a result of tariffs not covering the cost of service delivery. The reasons for the gap between tariffs and cost of service were one or a combination of a number of factors including high cost of generation, high cost of operations, high system-wide distribution losses and low tariffs, all of which need to be addressed if the sectors are to deliver the quality of service required to enable the respective economies to be competitive.
Power sector finances in Ghana are extremely stretched. How can Electricity Company of Ghana (ECG) become financially viable and what steps need to be taken?
Ghana’s power sector is burdened by huge debts largely as a result of high cost of generation, high cost of service delivery, non-cost-recovery tariffs and inability to collect revenue. It is clear that the power sector can no longer just demand high tariffs and expect the consumers to pay; there is a high level of customer fatigue with high cost and poor service delivery. With the current system where ECG does not determine the bulk generation costs and therefore the prices at which it procures power, ECG’s major contribution to the sector’s financial challenges is as a result of high cost of operations, high cost of operations and low levels of bill collection. Even then, in the case of low rates of bill collection, ECG will argue that their biggest debtor is government.
The financial viability of ECG will depend on working seriously with all major stakeholders, especially government, to review and take real steps to address all issues mentioned. Change of management alone will not solve the sector’s problems; all issues must be tackled together. Without a competitive and well-managed power sector it will be difficult for our economy to be competitive, hence we all need to be interested in the sector performing excellently well.
Can this issue be helped, or at least alleviated, by companies like Eni, which has just begun gas production from the Sankofa field?
If the production from the Sankofa field translates into security of fuel supply at competitive pricing for the Ghanaian power system, generating revenue from the excess gas resulting in the gas industry becoming a net revenue generator, then Sankofa will help.
To achieve these there are some major decisions that need to be made such as what happens to WAGP. Will the reverse-flow project happen? Has the feasibility been done? These questions need to be answered among others to enable a full assessment to be made of the full impact of Eni coming on stream on the sector and the economy at large. With so much power capacity sitting to the east in Tema that needs gas while all the indigenous production is in the West, we have to address the issue of reverse flow of gas into Tema for Eni to yield optimum benefits.
Considering current prices for domestic electricity consumption, how would you assess the government plan to provide universal access to electricity by 2020?
Achieving universal access by 2020 is possible since Ghana’s electrification rate is very high, 90% plus. The real task is how electrification can translate into economic and social gains for the people and the country, not just for the last 10% of people to benefit from universal access but for the country as a whole. Given the huge investments that go into service delivery, we need to review and continuously improve the industry and the use of the service to obtain optimum benefits from the investment. If the social and economic consumption of electricity are balanced, consumers will be able to afford effective tariffs. Currently, social consumption is the higher of the two hence contributing to the challenges with setting and collecting cost recovery tariffs.
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