Ghana looking at alternative power source to cut carbon emissions
Adnan Adams Mohammed
Ghana is working to tackle its carbon emissions as it has
signed a deal with the World Bank in 2019 intended to reward community efforts
to reduce carbon emissions from deforestation and forest degradation.
According to officials at the Energy Ministry, there is
scope for improvement in renewable energy electrification usage and grid
projects. Ghana’s power sector has not been free of difficulties. The
phenomenon of “Dumsor” has seen sporadic power outages. This has been driven by
low water levels and problems with paying bills to Nigeria for gas.
Recent estimation put Ghana's access to power around 86%.
The National Electrification Scheme (NES) was launched in 1990, at a point when
power access was estimated at 20%. There are considerable resources. The
Akosombo Dam project was completed in 1972 and generates around 900 MW.
Hydropower accounts for about 64% of the country’s power generation.
“The government plans to gradually diversify towards
renewable energy sources (solar, wind and nuclear) in the medium term, and
pursue low-cost power delivery to the consumers,” officials at the energy
ministry has said.
This will involve expansion of the country’s distribution
system in addition to bolstering “mini-grid and off-grid applications to
achieve this policy objective. This will also support the national goal set
forth in Ghana’s Intended Nationally Determined Contribution (INDC) submittal
dated September 2015, to scale up renewable energy penetration by 10% by 2030.”
Companies have made offshore gas finds in the last few
years. These come in addition to the West Africa Gas Pipeline (WAGP), which
brings gas from Nigeria.
There are challenges, though. “We are undertaking an
ambitious reform programme to protect the future of the sector because, as it exists
today, it is not financially sustainable. We are committed also to private
sector participation in the Electricity Company of Ghana (ECG) in the
distribution of electricity,” a government representative close to the sector
said, pleading anonymity.
At the heart of Ghana’s plans for reforms, under the Energy
Sector Recovery Programme (ESRP), is the aim of securing power at affordable
prices for the country. The World Bank-backed ESRP runs from 2019 to 2023.
Moving the country beyond aid, as the government intends,
“can only be achieved with a sustainable and cost-effective energy sector”.
The government is under pressure to demonstrate progress on
this front. A presidential election is due to be held in early December. This
will see President Nana Akufo-Addo square off against former president John
Dramani Mahama. The two have run against each other repeatedly.
Take or pay contracts have put pressure on Ghana, with the
country still on the hook for power it cannot absorb. Costs related to
take-or-pay agreements, generation tariffs and financing are passed to
consumers in capacity charges, the government source noted.
“The ESRP will tackle these problems by optimising the
installed generation capacity in order to provide a more efficient and
cost-effective sector for all involved,” the official said.
The bill for excess power is estimated at $500 million.
Installed capacity in mid-2019 reached 5,082 MW, while peak demand is 2,700 MW.
Demand is rising but not quickly enough to absorb this
excess. The aim is to renegotiate deals with independent power producers
(IPPs).
“The ESRP steering committee, together with the relevant
ministries, departments and agencies in the energy sector are exploring options
and negotiating comprehensive and collaborative solutions with each IPP,” the
government official said.
Progress should be coming in the near term.
The aim is to allow all parts to flourish. Where private
investors can grow and help meet local needs. “These reforms will ensure funds
are well spent on projects that will drive forward the economy.” The official
was reluctant to commit to a deadline for progress.
Gas is one of the sources of power for Ghana, in part driven
by supplies from the offshore. The Sankofa project enshrines the country’s
take-or-pay problems.
The deal was signed in 2015, when the country was struggling
with power shortages. The agreement was backed by the World Bank with the aim
of providing cleaner and more reliable power.
Financing of the Sankofa non-associated gas field involved
commitments to an escrow account, to ensure payments to the producers. This was
backed by a $500mn letter of credit, which was in term insured through a World
Bank guarantee.
The price paid for Sankofa gas is also high. In mid-2019
this was reported to be $9.8 per million British thermal units. Under the 2020
budget, the benchmark gas price was projected to be $4.57 per mmBtu.
The current government, the New Patriotic Party (NPP), has
been critical of the previous government’s signing of the deals.
Ghanaian Finance Minister Ken Ofori-Atta said the NPP had
been forced to tackle the “exorbitant energy bill from expensive,
difficult-to-explain ‘take or pay’ of Power Purchase Agreements; a pile-up of
unpaid arrears and outstanding commitments, mostly accrued from contracts
awarded without the slightest care for the public purse”.
Talks are being held with “gas suppliers with a view to
reducing the price of natural gas”, the source said, in response to a question
on the Sankofa deal. Further, the government plans to develop and increase
productive non-power uses for gas, for example, for fertiliser.”
Gas from the Eni-operated field began flowing to a floating
power plant, owned by Karpowership, at the end of 2019.
0 comments: