Interview: Emmanuel Antwi-Darkwa
How would you assess the current state of power generation in the country?
EMMANUEL ANTWI-DARKWA: A couple of years ago Ghana faced some difficulties, particularly regarding stability and reliability of electricity supply. There are, however, positive indications of progress: over the last 10 months we have witnessed improved stability in the sector and blackouts are no longer the norm. Our ability to deliver to the public has been consistent, but a variety of issues still need to be addressed.
Hydropower currently provides 40-50% of power generation, but the future lies in thermal generation, since Ghana has the required resources and it is a relatively clean source, involving lower costs and maintenance. Renewables is another option. An effective power generation system is key to the development of an industrial economy. Natural gas would be the main source, but Ghana also has abundant renewable resources so the VRA has several renewable energy projects under way in solar and wind, having recently completed a 2.5-MW facility at Navrongo in the Upper East Region, which it is also operating. Though small, it has provided useful experience to guide the management of future large-scale projects. There are additional projects in the pipeline with solar plants at Kaleo and Lawra, and another at Bongo in the Upper East Region.
In terms of the prospects for wind, there are abundant resources in the eastern part of the country along the coastline. There are currently two projects under way, each of them with a capacity of 75 MW, and we are opening up to private sector collaboration. Moving forward, the ability to bring additional capacity to meet demand is essential, as is ensuring that resources are used properly by not building excess capacity.
In which ways could a potential VRA listing on the Ghana Stock Exchange (GSE) be beneficial?
ANTWI-DARKWA: The listing of the VRA on the GSE is one of the options in terms of introducing private sector participation in the generation segment. There are obvious advantages of listing including, among others, transparency of operations and improvement in efficiency. It also provides an avenue for Ghanaians to invest funds in national assets.
There may be some risks related to the fact that power generation is a strategic business, and private investors could make decisions that are not necessarily aligned with the public interest.
However, this is something that could be addressed during the initial public offering in order to achieve a balance of public and private interests.
What is being done to ensure the long-term financial sustainability of the power sector?
ANTWI-DARKWA: The major challenge over the years has been the financial sustainability of the sector. This has been largely due to electricity tariffs that are not cost reflective. It is a simple issue, yet difficult to implement. We require some reforms in the tariff-setting mechanism, because if tariffs are not correctly set there will be difficulties in maintaining financial stability. The root cause of the large inter-utility debt is that tariffs did not respond to cost factors within the environment. This was exacerbated by the less-than-optimal collection rates set by the distribution utilities.
The government’s programme of issuing energy bonds to pay off the inter-utility debts should bring financial sustainability to the sector. However, to prevent future debt build up, we should focus on improving tariff setting, reduction in technical and commercial losses, and revenue collection. The Cash Waterfall Mechanism, which will allow predictable and fair distribution of revenues among the different stakeholders throughout the electricity value chain, should help in addressing some of these challenges.
In addition, private participation in the power generation segment will hopefully allow for a more competitive environment that will be of benefit to our consumers.
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