Interview: Samuel Dubik Mahama
Which key factors are contributing to development in the electricity distribution segment, and what new challenges exist in this space?
SAMUEL DUBIK MAHAMA: An increase in electricity demand has a knock-on effect on the size of the distribution network, necessitating an extension of the network to serve new loads and accommodate new customers. Demand is also impacted by considerations such as price, a country’s economic performance, macro-economic conditions and the size of the customer population. Electricity is an elastic good and, as such, a slight uptick in tariffs could trigger a dip in consumption since the consumer base may be price sensitive.
A buoyant economy can lead to high energy consumption, as electricity is critical to most of the growth enterprise of a country. Conversely, an adverse macro-economic environment affects the disposable income of consumers and, by extension, the demand for electricity. Meanwhile, an increase in the number of customers positively affects electricity distribution.
In addition to a lack of the funding required to fast track the modernisation of distribution networks, other challenges in the segment include the proliferation of rooftop solar panels and captive generation plants. These may poach customers from electricity distribution companies, leaving distributors with stranded assets and greatly impacting their business model. However, the passage of the net-metering tariff protects distribution companies. It is imperative for distribution companies to position themselves strategically to partake in new trends and avoid losing out.
How is ECG harnessing alternative sources of electricity to shift Ghana’s energy mix towards a greater share of renewable sources?
MAHAMA: In a significant stride towards sustainable energy solutions, as of end-2023 ECG has two operational renewable energy plants – both of which are 20-MW solar photovoltaic projects. Although these projects account for less than 2% of ECG’s total contracted power capacity, they signify a promising shift towards a greener energy future. To drive down electricity costs for end users, ECG is ramping up efforts to integrate more renewable power sources into its energy portfolio. This move is expected to yield substantial benefits for both ECG and Ghana as a whole.
By prioritising the development of renewable energy facilities, the country may experience lower costs compared to relying on the electricity generated by incumbent thermal power plants. This trend looks likely to have a far-reaching positive impact on the economy and environment alike in the years ahead.
What is the role of independent power producers (IPPs) in diversifying electricity generation, and where do opportunities exist for investors?
MAHAMA: Since the unbundling of the power segment in 2006 and the subsequent attraction of private-sector participation, most of Ghana’s additional power generation has been driven by private-sector players. It thus stands to reason that any diversification agenda should be endorsed by existing and prospective IPPs.
Ghana recognises the importance of diversifying its energy mix and has identified renewable energy as a major driver of this goal. The Renewable Energy Master Plan (REMP), published in 2019, was designed to help the country meet these goals. The framework seeks to direct $5.6bn of investment towards the development of renewable energy sources, with 80% expected to be sourced from the private sector, while minimising the impact of energy production on the environment.
The REMP requires electricity distribution companies and bulk customers to incorporate renewables into their consumption mix, thereby helping to ensure that there is a market for generated renewables. Translating into an estimated $460m of investment annually in the 12 years leading to 2030, the plan is expected to create major opportunities for investors in the coming period.
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