Cheap Electricity and Accessibility: stakeholders share possibilities
Adnan Adams Mohammed
Access to electricity has been one of the bedrocks of industrialized economies, social integration and global development and it affects every aspect of human life and economic development.
For about two decades now, businesses in the country have consistently advocated for cheaper and reliable power supply as successive governments keep giving assurance, but all seems a mirage to the business owners and individuals.
In attempts to win the trust of businesses for the assurance of stable electricity supply, the President, Nana Addo Dankwa Akufo-Addo, last week commissioned the Pokuase Bulk Supply Point (BSP) Substation to increase reliability of power supply to homes, businesses, and industrial plants in the northern parts of Accra. It is also expecting to soon commission other BPS at Kasoa in the Central Region and two primary substations at Kanda and Legon in Accra.
“Electricity is no longer a luxury. But rather a necessity, and we must commit ourselves to working hard and ensure that we achieve universal coverage in this country as soon as possible to spur economic growth,” the President at the commissioning ceremony. “Government remained committed to ensuring safe, stable, and affordable power supply in the country.”
The substation, President Akufo-Addo pointed out, was strategically positioned to cater to the increasing load demand for electricity in the Northern parts of Accra and noted that, the government is carrying out several other initiatives and projects to meet the increasing power needs rising out of population growth and the Governments industrialisation agenda.
Subsequently, a Senior Presidential Advisor, Yaw Osafo-Maafo has recounted that, for the industry to be able to absorb the teeming unemployed youth in the country, it is necessary for firms to have access to reliable power at an affordable cost, as that will make them competitive.
The former senior minister speaking at the Ghana Economic Forum described the unemployment situation as scary.But, assured that with a well-functioning and competitive energy sector, industries should be able to take up more graduates to reduce the unemployment menace.
“The industrialisation drive by government demands that we pay keen attention to the energy sector if we are to confront head-on the scary unemployment canker challenging our development agenda today in this country.”
“Energy is therefore key in creating employment through industrialisation. You cannot industrialise without energy. It’s not just energy, but energy at a competitive price. If you are taking energy at twice the cost in Nigeria and thrice the cost in Liberia, you cannot then produce anything to sell competitively,” he said.
Mr. Osafo-Maafo emphasised that the energy sector is key and critical in the development discussion of any economy; and more importantly, emerging economies like Ghana must make energy the backbone of development, hence government has stepped up efforts to ensure this happens.
“This made government deepen the discussion on the Energy Sector Recovery Programme (ESRP) with establishment of the cabinet interministerial task force on energy with a five-year implementation plan and arrangement from 20218 to 2023 in five priority objective areas: namely the security of supply, competitive tariffs, support for low-income consumers, as well as strategic industrial growth and universal access to electricity and energy.
“These multifaceted priority areas have guided government to make significant investment into the entire energy sector, and equally doing so in recent times with the view of ensuring that there is reliable and sustainable power at competitive and affordable prices to drive government’s industrialisation agenda, including the One District, One Factory initiative,” he said.
However, an Independent Energy Consultant, Dr. Nii Darko-Asante has shared that, inefficiencies and power-theft remain the biggest challenge, particularly in the distribution of electricity to consumers contributing to higher electricity tariffs.
He asserted that, despite efforts put in place to reduce the energy sector legacy debt power-theft and inefficiencies have made the cost of electricity high in the country. Therefore, he wants the power distribution companies; Electricity Company Ghana (ECG) and Northern Electricity Distribution Company (NEDCo) to complement efforts of the generation companies in reducing the level of theft and inefficiencies in the system.
“In terms of industrial tariffs, Nigeria has a lower tariff than Ghana in the sub-region due to cheaper gas. To improve, a significant portion of the inefficiencies and electricity-theft must be stopped to reduce debt in the sector.
“We need to bring the ECG and NEDCo more in line with efficient operations. There is a performance improvement programme that both are being mandated to put together to reduce their losses by 2 percent on year-on-year basis,” he said.
Dr. Darko-Asante maintained that the financial performance of ECG and NEDCo is important to sustainability of the energy sector, hence the decision by government to strictly monitor their operations for them to achieve the set target is very necessary. “When it comes to ECG and NEDCo meeting the performance indicators, there will be benefits and sanctions enforced by regulators and the State Interest and Governance Authority to ensure that for the needed change we actually meet the targets,” he said.
He explained that even though Ghana is not doing badly on setting electricity tariffs in the West African sub-region, cost of electricity to industry is still high compared to its peers in the region.
Cash Waterfall System
To improve revenue collection on the part of ECG, Dr Darko Asante agrees thatthe cash waterfall system was introduced to clear the debt owed power production companies. He further explained that the cash waterfall system was introduced to automatically demarcate a portion of the revenue collected by ECG to pay-off the capacity charges of power plants to reduce debt in the sector.
“Normally, when the producers supply power to ECG, ECG is supposed to pay directly to the producers so that they (producers) will pay the fuel suppliers. But ECG was unable to pay the power producers because of losses and theft in the system.
“The good thing about this system is the certainty and predictability it brought to the industry in terms of providing liquidity on weekly basis to the power plants,” he said. Dr. Darko-Asante expressed optimism about the system, saying he is hopeful the cash waterfall mechanism will gradually help in reducing the energy sector debt as cheaper gas is supplied to the power plants to generate electricity.
The Pokuase BPS
The Pokuase BPS has a total capacity of 580 Mega Volt Ampere (MVA) being the largest and most technologically advanced substation in Ghana among other four BPS in the Accra region. It is expected improve power supply quality and reliability to the over 350,000 utility consumers in Pokuase, Nsawam, Achimota, Anyaa, Sowutuom, Kwabenya, Ashongman, Legon, Haatso, Agbogba, Adenta and Aburi communities.
The facility will also reduce transmission and distribution losses and improve the financial viabilities of the Ghana Grid Company (GRIDco) and the Electricity Company of Ghana (ECG). Construction of the USD64.7 million facility commenced in April 2019 and was completed in May 2021. It was funded by the United States of America through the Millennium Challenge Corporation (MCC).
The Pokuase BSP is the first major construction project to be completed under the Ghana Power Compact with the MCC. The USD316 million Compact is helping the Government of Ghana improve the power sector. The Compact is also funding a BSP at Kasoa in the Central Region and two primary substations at Kanda and Legon in Accra. The Compact will end in June 2022. Government implemented the Pokuase BSP project through the Millennium Development Authority
The ESRP Project
In collaboration with the World Bank, government created the ESRP which identifies the policies and actions necessary for the sector to recover its financial footing. The five-year plan runs from 2019 to 2023.
Subsequently, a government negotiating team established under the Energy Sector Recovery Task Force started engagements with Independent Power Producers (IPPs) and gas suppliers under a consultation process to secure more favourable and sustainable agreements for both parties.
According to the Finance Ministry, the ESRP has started to pay dividends, with the announcement that it has so far saved the country’s energy sector US$5billion as of December 2020. This came about by relocating Karpowership and securing agreements with CENIT Power and Cenpower Generation Company