Africa’s infrastructure needs are considerable. International investors interested in Africa have as much as US$550 billion in assets that could be deployed to meet the estimated US$130-170 billion in infrastructure investment required by the continent each year. Despite the clear need and availability of capital, few infrastructure projects in Africa achieve financial close.
A number of reasons for this have been reported, including inadequate long-term policy plans and frameworks, developers and governments having limited experience in carrying out the relevant feasibility studies and front end work, poor coordination between the various governmental agencies and community resistance to certain projects.
This challenge may be addressed by governments, supported by multilateral development organisations, improving the flow of private-sector financing into commercially viable infrastructure sectors. Governments and their institutional partners can take decisive action to improve the commercial viability of projects, including by helping to mitigate political, currency, and regulatory risks, and, akin to some of the more successful procurement programmes, by creating a pipeline of bankable projects which leads to more focused investment.
A key area for infrastructure development in Africa is the power sector. Modern transmission infrastructure is crucial not only in terms of electrification, but also in providing both the flexibility and reliability needed to integrate additional power generation into the grid, as well as reducing transmission losses. Transmission infrastructure requires significant investment and private investment opportunities.
Government programmes in this sector could therefore usefully look to structures, both regional and international, which have successfully mitigated some of these risks. Furthermore, increasing the involvement of national and multilateral financial institutions that can offer additional funding, subsidies and innovative financing structures would successfully encourage further private sector investment.
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Ghana is estimated to lose US$100 million annually from transmission losses or leakages. Power transmission is the vital middle sub-sector in the three broad components that make up a power/electricity grid i.e. generation, transmission and distribution.
Even amidst a broader economic slowdown, Ghana’s energy consumption continues to expand, underlining the urgency of boosting generation capacity and improving access to power. Ghana is among the most advanced in its strategies to boost capacity, and while those plans have yet to fully materialise, there are a range of projects that should substantially boost generation and improve transmission and distribution.
The government continues to play the largest role in the sector at all points in the supply chain; however, the private sector is taking an increasing role. Private companies and liberalisation are having a positive influence on the power sector.
In 2014 the Institute of Statistical, Social and Economic Research forecast Ghana would lose between $320m and $924m per year in productivity as a result of power outages, and while supply reliability has improved in the years since, the system still struggles with intermittent disruptions. Low water levels at Ghana’s dams, which contribute nearly half of total output, is one of the primary factors behind dumsor. The country also relies on thermal production for just under half of its total generation capacity, but here too it has faced challenges.
Ghana’s energy industry is largely managed by state-owned entities. The Energy Commission, established in 1997, regulates and manages the development and utilisation of the country’s energy sector. The power subsector and utilities are controlled primarily by three companies - namely the VRA, Ghana Grid Company (GRIDCo) and Electricity Company of Ghana (ECG).
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Access to electricity in Ghana has improved over the last few years and is higher than most other countries in sub-Saharan Africa. The government aims to increase electricity access to 90% of the population by 2016 and has committed itself to universal access by 2020. Energy consumption has also risen rapidly, and according to the Energy Commission, demand is growing 10-15% per year.
Those figures are straining existing supply. Roughly 2434 MW is overseen by the VRA and 1210 MW is controlled by IPPs. This reduction in available power is a significant challenge as demand continues to grow, and could potentially be associated with the country’s slower economic growth in 2015, when grid transmission of electricity comprised 98.3% generation and 1.7% imports.
Today, this figure stands at just under half, with generation largely provided by three hydro plants. Akosombo, which was built in 1966, continues to be Ghana’s most important power facility; however, low rainfall is hindering the plant’s ability to generate at anywhere close to capacity. As Ghana’s hydropower has become more tenuous in recent years, the country has been forced to rely more on its thermal production.
Ghana’s thermal power plants are primarily clustered around Tema and Takoradi, and at the end of 2015 total installed thermal capacity was 1209.5 MW, of which 1115 MW was considered reliable, according to the Energy Commission.
The 678-km WAGP was designed to transport natural gas from Nigeria to Benin, Togo and Ghana. While the WAGP used to contribute virtually all of Ghana’s gas supply, since Atuabo’s completion domestic generation has increased rapidly. The AGPP is likely to get a further long-term boost from the Sankofa oil and gas field, which has the potential to reduce Ghana’s dependency on energy imports by 12m barrels, according to the World Bank.
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In the long run this should dramatically improve pricing and sustainability for the sector, but supply from both the WAGP and AGPP has been irregular in recent years. The WAGP is subject to supply disruptions, which have ranged from damaged infrastructure due to errant fishing boats in the Gulf of Guinea to Nigeria’s government diverting gas towards its domestic sector.
Another remedy may come in the form of additional imports. GNPC plans to implement a build-operate-transfer partnership with a private trader and has been in communication with Qatargas, BP, Shell and Woodside Energy, though a final deal had not been confirmed at the time of press. Two import terminal projects are also planned.
In the long term Ghana’s energy deficit should recede as domestic gas production increases and processing infrastructure expands, and as new generating plants, including coal and hydro, are built. One of the most visible short-term remedies has been the government’s move to lease two power ships to supplement the country’s permanent energy supply.
The government is also working on a number of projects to alleviate the country’s power challenges.
The Power Sector in Ghana
The Volta River Authority (“VRA”) was established in 1961 by the Volta River Development Act, 1961 (Act 46). The same legislation prescribed the functions of the VRA, vital amongst these being the generation of electrical power for domestic and industrial use in Ghana, the construction and operation of a power transmission system and the distribution of electricity to consumers at low voltages. In 1967 however, the Electricity Corporation Decree, 1967 (NLCD 125) established the Electricity Corporation of Ghana (ECG) which assumed the sole electricity distribution responsibilities of the VRA nationwide.
In order to reduce the burden on the ECG, the VRA later created the Northern Electrification Department (NED) in 1987 and the organisation subsequently took over the distribution mandate in the Northern regions of Ghana.
GRIDCo Development and Operations
The current framework and layout of the power sector in Ghana is largely as a result of Power Sector Reforms undertaken by the Ghanaian government in the late 1990s. These reforms included the creation of an Energy Commission in 1997 to oversee the technical regulation of the electricity, natural gas and renewable energy industries, the formation of the Public Utilities Regulatory Commission in the same year to provide guidelines for the tariffs and charges on public utility services and importantly, the unbundling of the then vertically-integrated Volta River Authority amongst other developments.
This license was granted to Ghana Grid Company (GRIDCo) and the organisation commenced operations in 2008 as the main organ responsible for power transmission in Ghana following its receipt of the requisite electricity transmission assets and core staff from the VRA.
Despite these and the other changes made within the framework of the Power Sector Reforms, the issue of inconsistent power supply has remained a significant challenge facing the power sector in Ghana over the past few decades. The magnitude and effect of this overproduction was made clear in the Ghana 2019 Mid-Year Fiscal Policy Review presented by the Finance Minister to Parliament where it was revealed that the installed capacity of the generating subsector at 5,083 MW was nearly double the peak demand at the time (2,700 MW). Ghana had to bear costs exceeding GHS2.5 billion annually for power generation capacity that was neither needed nor consumed.
Regardless, this surplus capacity has not resulted in constant power supply due, in part, to inadequacies in the electricity transmission infrastructure.
Addressing Ghana's Electricity Sector Challenges
Technical Challenges
Demand for electricity in Ghana has grown dramatically over recent years and is showing no signs of slowing down in times to come. The past five years have seen an annual growth rate of 10.3 percent in electricity demand with peak system demand figures moving from 2,118 MW in 2015 to 3090 MW in 2020. Within the same time span, the total annual electricity consumption rose from 11,678 GWh to 19,717 GWh. This growth in demand can generally be attributed to economic growth, urbanization and increases in industrial activity.
As of 2016, the National Interconnected Transmission System consisted of approximately 5,207.7 circuit kilometres of high voltage transmission lines employed to connect the operating power generation plants at Akosombo, Kpong, Bui, Tema and Aboadze to the sixty-four (64) Bulk Supply Points operated by GRIDCo across Ghana. By the close of 2020, the transmission network had grown up to 7,200.5 circuit kilometers and its overall Total Transformer Capacity had more than doubled, standing at 8,901.8 MVA with sixty-five (65) Bulk Supply Points across the nation.
Nationwide access to electricity as at 2020 was at 83 percent, with 91 percent of residents in urban areas having access to electricity while the same was true for only 50 percent of residents in rural parts of the country. At present, several whole communities in rural remote areas do not have access to power and this is primarily due to a lack of infrastructure to transmit electricity from the power generating plants to these inland locations, particularly in the mid-portion and Northern parts of the country.
Attempts to improve power transmission to rural areas have been embarked on over the years, key amongst them being the Self-Help Electrification Program, an initiative introduced by the National Electrification Scheme whereby rural communities complement the efforts of the government with regards to provision of basic transmission facilities to secure their accelerated connection to the national grid. However, the data suggests that much more work needs to be done and barring significant infrastructural investments, the strain created by the nationwide growth in electricity demand would adversely affect the limited progress that has been made in rural electrification.
Between 2006 and 2016, Transmission and Distribution losses made up as much as 20.1 percent of the total electricity supplied and although distribution losses have proved more significant with 16.2 percent of losses stemming from distribution and commercial losses by the ECG and NEDCo, as opposed to 3.9 percent losses reported in the transmission sub-sector, recent trends have shown an increase in transmission losses which moved from 3.8 percent in 2017 to 4.5 percent in 2020 representing 888GWh of losses in that year alone. Needless to say, the 4.5 percent losses recorded fall below the set benchmark by the PURC and the Energy Commission has reported that investment in new transmission lines and the upgrade of existing outmoded lines is paramount to averting the rising trend in transmission losses.
The lack of adequate infrastructure has been especially felt in recent times with a series of power outages around the country between January and April of 2021 attributed to system challenges on the NITS spurring an investigation by the PURC into the causes of the erratic power supply. The ensuing report stated faults in transmission lines and line insulators, compressor failures, emergency upgrades and modification works, construction of new infrastructure on the NITS, scheduled maintenance and delayed investments and completion of projects as some of the causes of the power outage over the observed time period.
Briefs released by the Ministry of Energy, likewise attributed the power outages to maintenance work and improvements being carried out on outdated systems in the NITS indicating that the discomfort experienced in the short-term was inevitable in the quest to secure long-term improvements in the system.
Financial Hurdles
These issues are only compounded by the financial difficulties facing the companies operating in the transmission and distribution subsectors. In 2018, despite attaining a 16.67 percent increase in power transmitted, GRIDCo recorded a net loss of GHC114.3 million. This was in part due to a significant loss in transmission revenue from GHC715.2 million in 2017 to GHC490.2 million in 2018, caused by the 50 percent decrease in the Transmission Service Charge set by the PURC.
The prices in the sector are not regulated by the traditional market forces of demand and supply due to state intervention and this has led to the transmission and distribution entities running at a deficit for a number of years. As of 2017, the total debt owed to GRIDCo by the ECG and the Volta Aluminium Company (VALCO) stood at GHS862 million.
Auditor General's report of 2014 reveals that the national electrification project which cost the taxpayers millions of dollars was executed with substandard poles and leaking transformers. The rural electrification project has over the years been embroiled in controversies.
On Monday, March 14, Parliament passed the commercial agreement for a separate contract which has been found to be overpriced to the tune of $9 million for rural electrification in the Eastern, Volta and the Northern regions due to be executed by China Hunan Construction Engineering Group.
However, the controversies surrounding the projects are intensifying at a time when the Electricity Company of Ghana (ECG) is complaining of insufficient funds to upgrade its equipment and to ensure efficient reliable power supply to Ghanaians.
JOYNEWS has found out that the Auditor-General's report has discovered that ECG gave out material loans to some of its associates to the tune of almost ¢4 million when the amount could have helped the nation’s energy supplier solve part of its challenges.
Table: Key Data on Ghana's Power Sector
| Metric | Value | Year |
|---|---|---|
| Peak System Demand | 3090 MW | 2020 |
| Total Annual Electricity Consumption | 19,717 GWh | 2020 |
| Transmission Network Length | 7,200.5 circuit kilometers | 2020 |
| Total Transformer Capacity | 8,901.8 MVA | 2020 |
| National Electricity Access | 83% | 2020 |
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