ENERGY SCENARIO OF GHANA

By
OLAOYE BABATUNDE
MATRIC: 233842

ABSTRACT

Ghana's enormous potential for energy has turned into a major problem for the country, causing the
economy to grow less rapidly and national development to lag. In order to establish the economic
viability coupled with the sustainability of renewable energy sources in Ghana, the study emphasizes the
trends on the power grid of the energy potential over the previous ten years' influence regarding the
directions on the power grid.

The Introduction shows that Ghana's energy production has gone through a number of stages, starting
with diesel generator supply systems owned by businesses and factories and progressing to
hydroelectricity, thermal power electricity run on natural gas or crude oil, and solar power.

In the literature review, it is reported that Ghana has installed hydro, thermal, and solar plants with a
combined capacity of 4398.6 MW as of December 2017. Out of the total electricity, 1580 MW from
hydropower accounts for 35.9%, 2796 MW from thermal energy accounts for 63.6%, and 22.6 MW
capacity accounts for 0.5%.

The paper concludes that Ghana has achieved commendable access to modern energy services
compared to her sub-Saharan peers but recommends further efforts to achieve the UN Sustainable
Development Goal 7 (SDG7) which is to “ensure access to affordable, reliable and modern energy for all
by 2030,” including universal access to electricity and clean cooking, a greater share of renewables in
the energy mix, and a doubling of the rate of improvement of energy efficiency.

1. INTRODUCTION

Ghana, located in West Africa, has been facing significant challenges in its energy sector. Despite being
rich in natural resources such as oil, gas, and hydroelectric potential, the country has struggled to meet
its growing energy demands. Ghana's energy sector is characterized by frequent power outages, high
electricity tariffs, and a heavy reliance on fossil fuels. These issues have hindered the country's economic
growth and development, making it imperative for Ghana to explore sustainable and reliable energy
solutions.

1.1. Background

According to Scowcroft (2012), electricity is the essential component of a functional society and one of
the key factors influencing a nation's economic well-being. In both the industrial and human life sectors,
it is essential for carrying out daily tasks (Kumi, 2017b). Many nations struggle to deliver the necessary
amount of power in a sustainable manner due to an expanding global population and rising living
standards. As a result of the increasing climate instability, this pressure is particularly noticeable in
emerging nations (Alam & Rabbani, 2007). According to Owusu and Asumadu-Sarkodie (2016), Ghana's
energy industry has had several power problems during the previous 10 years, which have had a
significant impact on the country's economy. Electricity was listed as Ghana's second-biggest business
constraint by the World Bank. Additionally, it projected that Ghana lost 1.8% of GDP during the 2007
power outage(Kumi, 2017b). Also, the Institute of Statistical, Social and Economic Research (ISSER) at
the University of Ghana in a 2014 report in their study that Ghana, on the average, lost production
worth about the US $2.1 million per day (or the US $55.8 million per month) through the power crisis
alone(Kumi, 2017a).

Notwithstanding that, Ghana has made significant strides in electricity access due to long-range energy
planning with clear targets, external funding availability, political/popular demand, and the central
Government’s active role in implementing energy policies. By the close of December 2017, 4398.6 MW
capacity had to comprise Hydro, Thermal, and Solar Plants. Out of the total capacity, Hydropower
generates 1580 MW representing 35.9%; (thus, Akosombo: 1020 MW, Bui: 400 MW, and Kpone: 160
MW). On the other hand, Thermal power plants generate 2796 MW, represented 63.6%, whiles 22.6
MW capacity representing 0.5% by the Solar plants(Nyasapoh et al., 2022). These reveal that the
installed capacity in operational and available grid power supply at the end of 2017 was about 4398.6
Megawatt (MW). The 2016 projections from the Energy Commission indicate a marginal increase in the
installed capacity of electricity. Given the historical dependency on Ghana’s Hydropower (with relatively
unchanged generating capacities) power consumption, there is a relatively significant downwards
change in consumption by 8.5% in 2017. However, Thermal, and Renewable plants significantly
increased by 22.7% and 36.1%, respectively, in 2017, indicating a gradual shift from hydropower plants.
The expansion in both thermal and renewable power indicated above is partly correlated and
proportional to the population growth of the country(Nyasapoh et al., 2022). Table 1 shows the current
energy generation capacity in Ghana.
Average annual
growth rate (%)
2000 to 2017
1980 1990 2000 2005 2010 2017 unless otherwise
indicated
Energy consumption1
- Total 0.053 348 0.056 273 0.258 4 0.124 4 0.260 2 0.335 4 1.54
- Solids2 0 0 0 0 0 0 0
- Liquids 0.036 62 0.039 633 0.089 749 0.091 564 0.114 457 0.156 5 2.46
- Gases 0 0 0 0 0.014873 0.04026 15.28*
- Nuclear 0 0 0 0 0 0 0
- Hydro 0.016 728 0.016 64 0.024 925 0.021 296 0.027 811 0.020 21 -1.22
- Other renewables3 — — 0.143 7 0.114 9 0.103 1 0.118 4 -1.13
Energy production
- Total 0.018 998 0.020 595 0.186 7 0.153 3 0.190 0 0.566 6 6.75
- Solids2 0 0 0 0 0 0 0
- Liquids 0 0 0 0 0.008 164 0.350 8 329.69*
- Gases 0 0 0 0 0 0.032 14 not applicable
- Nuclear 0 0 0 0 0 0 0
- Hydro 0.018 998 0.020 595 0.023 795 0.020 26 0.025 18 0.020 21 -15
- Other renewables3 - - 0.162 9 0.133 0 0.155 0 0.163 4 0.3
Net import
(Import-Export)
- Total 0.038 200 0.036 903 0.091 447 0.092 196 0.111 237 -0.168 5 -203

Table I. Energy Generation in Ghana (Ghana 2018, n.d.)

2. ENERGY SECTOR INITIATIVES AND POWER SECTOR REFORMS

The precarious shortfalls in electricity generation capacity and supply have been addressed in a number
of ways, including by successive governments securing loans and launching power sector reforms to
restructure the industry and promote private sector involvement. The World Bank, in particular, has
played a significant role in these reforms by encouraging increased private sector involvement in
infrastructure development. The International Development Association has also made contributions.
The IDA helped to finance the Akosombo dam and the Kpong power plant, to rehabilitate transmission
systems, to extend the grid to the northern regions, to help the Electricity Company of Ghana (ECG) to
improve its distribution networks, and to provide electricity to small urban areas, district capitals, and
rural areas(Agyekum et al., 2019). From 1960 to date, the power sector has received significant amounts
of donor support (for new construction and for rehabilitation) to ensure better electricity services to all
Ghanaians.

Under the Structural Adjustment Program of 1986 (with the theme of making the private sector an
engine of growth), the World Bank requested reforms in Ghana’s power sector to encourage greater
private sector participation(Singh et al., 2015). Power sector reform was initiated in 1994 to regulate the
monopoly power of generation, transmission, and distribution towards deregulating the market for
competition and open access to transmission lines to permit new market participants to share in power
generation, transmission, and distribution. Reform was also initiated to reform the electricity tariffs that
had resulted in low investment, substantial deficits of the electricity utility companies, and poor service
quality. The need to invest in additional capacity generation and infrastructure to augment increasing
demand and to encourage private investment and competition in the sector were all triggered by the
need for the reform(Energy, 2010).

The Ghana Grid Company Ltd. (GRIDCo) was established in 2006, as part of the effort to restructure the
industry. By the Energy Commission Act (541) which established it, GRIDCo’s primary function is to
facilitate electricity transmission via delivery at power distribution centers and subsequently to all
market participants, while the VRA continues its operation as a power generation company (GRIDCo).
The Energy Commission and the Public Utility Regulatory Commission (PURC) were also formed in 1997
to establish performance standards for utilities and to create and maintain a healthy competitive power
sector that balances the interests of utility providers and consumers (PURC, Ghana).

The Electricity Regulation also established in 2008 was to create a competitive wholesale electricity
market to facilitate wholesale electricity supply and subsequently create an enabling environment to
attract independent power producers. Ultimately, this was to enhance Ghana’s strive towards attaining
an electricity generation capacity of 5000 MW by 2016.

Presently, a national energy policy is being implemented to provide a concise outline of government’s
policy direction, challenges, and actions, to facilitate the effective management and development of the
sector, and to provide the public with information about the government’s policy goals. The policy
addresses the poor quality and unreliable supply of electricity and the poor financial performance of the
utility companies and helps them raise the finance needed for infrastructure development. In addition,
the policy focuses on institutional and human resource capacity strengthening and creation of a
competitive electricity market and an enabling environment to attract private investment into the sector
to aid the government’s multilateral sources of funding.
Albeit there have been intentions to increase current generation capacity to at least 5000 MW, make
electricity universally accessible by 2020, and for Ghana to become a major exporter of electricity by
2015, the current financial and infrastructural challenges pose a huge risk. The power generation
expansion programs (Bui, Tema Thermal Plant 1 and 2, the Mine Reserve Plant, Asogli and Kpone
Thermal Plant) which were commenced in 2007 following the 2007 energy crisis are expected to add
about 1100 MW of generation capacity, although so far only 375 MW has been added.

Ghana's installed power capacity must expand to 5000 MW by 2016 in accordance with the National
Energy Policy (2010). This translates to roughly a doubling of the 2946 MW present producing capacity.
Thus, the strategy aims to construct an additional 2100 MW of installed capacity by 2016. But there are
several problems: The largest solar plant, the Nzema solar plant, which is expected to become
operational in 2015, is expected to produce 155 MWh; and (d) the mix for renewable energy is also
expected to increase to about 10% in 2015. The Bui Dam currently has an installed capacity of 400 MW.
The Aboadze Thermal Plant has an installed capacity of 550 MW and a maximum capacity of 682 MW.
The aforementioned plants and capacities is captured in Table 2.

Plant Installed Capacity (MW)

Hydro
Akosombo 1 020
Bui 400

Kpong 160

Subtotal 1 580
Thermal
Takoradi Power Company (TAPCO) 330
Takoradi International Company (TICO) 300
Sunon Asogli Power (Ghana) Limited (SAPP) — IPP 560
Cenit Energy Ltd (CEL) — IPP 110
Tema Thermal 1 Power Plant (TT1PP) 110
Tema Thermal 2 Power Plant (TT2PP) 80
Kpone Thermal Power Plant (KTPP) 220
Karpowership 470
Ameri Plant 250
AKSA 260
Trojan 44

Genser 22

Subtotal 2 786
Renewables
Safisana Biogas 0.1
VRA Solar 2.5

BXC Solar 20

Subtotal 22.6

Total 4 388.6

Table II. Ghana power plants with installed capacity

3. CHALLENGES

The power sector faces a host of challenges, including inadequate power supply infrastructure that
requires huge investment, over-reliance on hydro and gas, inadequate access to electricity, high cost of
fuel for electricity generation, transmission and distribution losses, an inadequate regulatory capacity,
enforcement, operational and management difficulties, and vulnerability to climate change. Future
power development faces great challenges due to rising living standards and increasing demand for
cleaner energy.

3.1. Limited generation capacity of power plants

The supply challenges of Ghana’s power sector are mainly seen in the periodic hydrological shortfalls as
a result of the uncertain pattern on rainfall and inflows into the hydropower facilities. Relying on rainfall
to supply water to the hydro dams to generate power may not be optimal due to changing climate
patterns. According to the Energy Commission (2014) higher inflows into the hydropower facilities
would have improved the overall power generation in 2013 amidst the limited gas supply from Nigeria.

The limited water inflows induce the country to rely on thermal power plants fueled by oil and gas. The
inability of these plants to attain full generation capacity due to limited and expensive fuel supply
inhibits frequent power supply. Supply of gas in 2014, at best, was limited to between 30 and 50 million
standard cubic feet per day (mmscfd) as against the contractually agreed volume of 123 mmscfd from
Nigeria to power the thermal plants. The deficit in gas supply has necessitated the use of crude oil by
VRA which has also proved costly in recent times. As a result, the thermal plants are unable to run
efficiently and at full capacity decreasing the power supply.

The weak financial position of VRA, the Electricity Company of Ghana (ECG), and the Ghana Grid
Company Ltd. (GRIDCo), coupled with obsolete infrastructure, has resulted in huge load pressure partly
responsible for blackouts. The Tema Oil Refinery’s (TOR) processing capacity since its establishment in
1963 has largely remained the same, and it is not able to import and process enough crude oil to meet
demand (Gyamfi et al., 2018).

3.2. Cost

Generally, utility companies operate as natural monopolies due to significant economies of scale that
exist in the industry. As a result, most energy companies operate as state monopolies with the
responsibilities of energy generation, transmission, and distribution to meet demand. Over time, this
arrangement has been plagued by limited capital and investment, weak infrastructure, poor
performance, and mismanagement. All the state-owned energy companies operate on high long-run
marginal costs, unable to attract additional capital to expand their operations, leading to inadequate
investment in infrastructure and subsequently high operating costs. The overloaded transformer sub-
stations, transmission and distribution losses, and transmission bottlenecks are contributory factors to
the frequent power outages.

Existing hydroelectric stations have high capital and maintenance costs, with revenues from electricity
supply financing such capital costs. A reduction in sales will affect the return on investment. The current
state of the stations’ generation capacity will require additional plants to be constructed to meet
demand, which in turn requires additional capital, thus reducing overall system returns. According to the
Ghana National Commission for UNESCO, about $9 billion is required between 2014 and 2019 to raise
the needed investment capital to develop the energy sector and finance its numerous initiatives
including oil and gas (which alone require $5.5 billion). Another costly factor is the high cost of
technology to develop renewable energy sources such as wind, solar, and thermal which have been
proposed by various stakeholders.

3.3. Sustainability

Every sustainable energy source depends on the ability to provide for fixed cost and recurrent cost. A
financially sustainable power sector requires that electricity is well priced to allow for full cost recovery
across the entire value chain. Electricity in Ghana is not well priced. Production is not adequate, and at
the same time, electricity is subsidized. The government, since 2004, has spent about $900 million on
fuel subsidies to VRA alone, an amount which is more than the cost of building the Bui dam.

Due to their failure to maintain and build the necessary infrastructure, the transmission and distribution
agencies (VRA and ECG) are in a grave financial situation. Prices continue to remain below actual costs,
and despite tariffs being raised frequently over the previous ten years, distribution businesses are
unable to recoup their expenses through tariffs. Additionally, tariffs fall short of covering the expenses
associated with manufacturing, distribution, and transmission losses. In order to keep the cost of supply
as low as possible and the sector's financial viability, the operational and production efficiency of the
sector's authorities is crucial.

4. CONCLUSION

Ghana's progress in achieving commendable access to modern energy services is praiseworthy,

reflecting the nation's commitment to improving the lives of its citizens. However, the task is not
complete, and the set targets of universal electricity access and increased LPG usage require sustained
efforts. By continuing to invest in energy infrastructure, implementing supportive policies, and fostering
public-private partnerships, Ghana can build on its achievements and move closer to a future where all
citizens have access to reliable and clean energy services, driving inclusive and sustainable development
across the country.
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