According to the World Bank’s 2013 Ghana energy report, $4bn of investment is needed over the next decade to compensate for previous investment lags in power generation, transmission and distribution infrastructure. Estimates for annual power demand growth range from 8% to 12%, meaning there is certainly a market for new power generation. To avoid unduly impacting the government’s balance sheet, the country is turning to the private sector in the hopes of boosting independent power producers (IPPs).
There are three IPPs operating in Ghana, contributing around 540 MW of the country’s nearly 2500 MW of installed power generation capacity. The Takoradi International Company (TICO) is a public-private partnership between TAQA Ghana (90%), a subsidiary of Abu Dhabi’s national energy company TAQA, and the Volta River Authority (VRA). In July 2012 parliament approved plans to expand the plant’s capacity from 220 MW to 330 MW. According to TAQA, the upgraded plant will be able to supply Ghana with 15% of its generating capacity, providing power to more than 1m people.
The Sunon-Asogli plant, located at Tema, is a joint venture between China’s Shenzhen Energy Group and the China-Africa Development Fund and was completed in 2009 to become Ghana’s second IPP. In February 2014, plans were announced to expand capacity from 200 MW to 360 MW. The CENIT thermal plant, also in Tema, came to being in its current form when the Tema Osonor Power Plant (TOPL) was acquired by CENIT Investment, which is owned by Ghana’s social security fund. The plant recommenced operations in October 2012 with a capacity of 126 MW.
There are also plans afoot to expand IPP capacity. In January 2014 TAQA announced that it intends to construct a 300-MW thermal plant upon the completion of the TICO expansion, while offering assistance in bolstering liquefied natural gas (LNG) import capacity. An arrangement was also agreed in February 2014 with Shenzhen Group to build Ghana’s first coal-powered facility. The first phase, expected to start in 2016, would be for 700 MW at a cost $1.5bn, with coal supplied from South Africa.
To continue the momentum Ghana has seen in the IPP segment, further investments will likely need to be made in distribution to improve efficiency and boost payment collections. At present, while IPPs are allowed to sell directly to bulk customers and large consumers such as mines, many of these clients have existing arrangements with the VRA. As a result, the Electricity Company of Ghana (ECG), which manages most of the country’s national grid, serves as the primary off-taker. According to industry observers, the ECG’s fiscal performance means that additional guarantees may be required to ensure the attractiveness of Ghana’s IPP environment.
“The ECG is in poor financial standing, the cause of which is not all its doing. There are a number of key stakeholders contributing significantly to the current state of affairs, and finding lasting solutions to the ECG’s issues will require dealing with all major detractors from the ECG’s financial health. In the present climate, IPPs, even if they are able to secure a power purchase agreement with reasonable tariffs, are concerned over payment collection,” Harriette Amissah-Arthur, executive partner at Arthur Energy Advisors, told OBG. Although a sovereign guarantee before entering into a deal could help mitigate the risk of non-payment, for Sampson Akligoh, head of research at Databank Financial Services, this might not suffice. “The ECG is the most inefficient arm of the supply chain, and under the current framework it is the only purchaser of energy,” he said. “IPPs are most often reluctant to negotiate with an inefficient monopoly in a poor financial position.”
Although Ghana already benefits from a significant hydro sector, with generating capacity well in excess of 1200 MW, the government is rolling out new targets for expanding alternative and clean energy. Ghana’s Renewable Energy Act has a stated goal of a 10% contribution by renewables, not including hydro, to the generating mix by 2020. While there is wind in Ghana’s coastal areas, the levels are considered too inconsistent to generate reliable wind power. However, the country is blessed with plentiful sunshine year round, which makes solar a more promising renewable source for development. Ghana receives 1800-3000 hours of sunshine each year, with daily irradiation levels ranging between 4.4 and 5.6 KWh per metre sq per day. Capital costs for constructing a renewable plant can be up to five times higher than for thermal. However, with new technology and higher production volumes bringing down unit costs for core components, room is opening up for new accessible investments. “Despite steep upfront costs, solar energy solutions offer an optimum mode of renewable energy generation for long-term and sustainable energy production because of its source: the sun. With proper support, solar has the potential to offer broad-range social transformation, specifically in deprived rural areas,” Francis Akuamoah Boateng, chairman of 3SiL Group, told OBG.
To help make renewables investments more attractive, in 2011 a package of incentives and regulations were passed, one of which requires the Public Utilities Regulatory Commission (PURC) to offer preferential rates for renewable power and places purchase obligations on utilities and bulk customers for 10 years. The actual tariff rates have not yet been set. The VRA is likely to consider locating most solar projects adjacent to existing hydro reservoirs, which should also help reduce overall costs by removing the need for new connections to the grid. The World Bank also suggests that solar systems be placed in more remote areas as a cheaper alternative to conventional power.
As of the end of 2012, there were more than 4000 off-grid photovoltaic (PV) systems privately installed across the country with total capacity of just over 1 MW, according to the Energy Commission. May 2013 saw the inauguration of the nation’s first stand-alone solar plant at Navrongo. Constructed with financing from the VRA, with capacity expanded to reach 2.6 MW by July 2013, the project is part of a larger plan to generate 12 MW of solar power at four separate sites in northern Ghana.
Ghana is set to potentially become the home of sub-Saharan Africa’s largest stand-alone solar facility. The 155-MW Nzema solar plant, proposed by the UK’s Blue Energy, is currently in the pre-construction phase. Once completed, the $400m project could single-handedly raise the contribution of renewables from 1% to 6%. US-based International Solar Utilities plans to develop six 100-MW power plants costing $125m each in the western, central and greater Accra areas, with further plans to build a module manufacturing plant at Tema that will supply PV panels to its Ghanaian facilities and be exported to other locations throughout Africa.
Leave Nothing To Waste
With significant rubber chip and cashew production, and a large agro-industrial sector centred on palm and cocoa, Ghana also offers potential for biomass production using the waste. Human-generated waste is also being explored. According to research conducted at Leicester’s De Montford University, some 60% of Ghana’s trash is made up of food content. In 2012, a group of local entrepreneurs started taking advantage of a provision that mining firms can power 10% of their private electric plants from renewable sources by collecting and selling waste to them at a price of around $7 per gallon. Septic waste represents another potential option for feedstock. Now called Pivot Works, the company received a grant of $1.5m from the Bill & Melinda Gates Foundation in 2011, and its aim is to convert faecal sludge into a fuel for industrial boilers and kilns in both Ghana and Kenya.
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