Electricity supply challenges have cost Ghana an average of US $2.1 million in loss of production daily. The electricity supply challenges can be attributed to a number of factors, including a high level of losses in the distribution system, non- payment of revenue by consumers, an overdependence on thermal and hydro sources for electricity generation, and a poor tariff structure.

Background

According to the African Center for Economic Transformation, the rapid increase in population growth, increased urbanization and rural electrification, increasing technology penetration, and the pressure to transform into a middle-income country has engineered a dramatic increase in demand for electricity in Ghana (African centre for economic transformation (2015).

Electricity supply in Ghana, over the past decade, is faced with supply challenges resulting in a considerable impact on the economic situation of the country (Nyarko, 2017). Electricity in Ghana has been ranked as the second most important constraint to business activities in the country and it was established that Ghana lost about 1.8 percent of GDP during the 2007 electricity supply crisis (Mathrani, et al., 2013).

Electricity Supply Challenges

• Ghana has been heavily dependent on hydro sources, mainly from the Akosombo dam for electricity generation as demonstrated. This is because hydro sources are known to provide the cheapest source of electricity as compared to thermal and renewable energy sources.
• The West African Gas Pipeline, transporting natural gas from Nigeria has been the major supplier of natural gas for electricity generation until the commissioning of the Atuabo gas processing facility owned by the Ghana Gas Company in 2015 (Boadu et al 2015). Gas supply from Nigeria has, however, not been reliable with Nigeria citing non-payment of debt as a major reason.

Ghana Electricity Demand, Supply, and Usage

Ghana has experienced an increase of 49.8 percent in peak load over the last 10 years. Gross electricity consumption in Ghana took a rather sharp decline of 18.2% from 2006 to 2007, before rising steadily by an annual average of 10.8 percent till 2014. This trend however declined by 11.3 percent from 2014 to 2015 before increasing by 15.3 percent in 2016 (Energy Commission of Ghana, 2016a; Energy Commission of Ghana, 2017). 

Ghana’s electricity supply performance, access and security in global and continental perspective, according to Energy Architecture Performance Index (EAPI), is far behind the world top 10 performers, having an average electricity supply score of 0.45; above the Sub-Saharan African average of 0.28 but lagging considerably behind the global average of 0.84.

Economic Cost of Failure of Electricity Supply

Power failures cause significant direct and indirect costs to utilities, consumers, and the general economy. According to World Bank estimates, the direct cost of power outages to African nations is typically about 2% of GDP. Ghana’s GDP growth averaged about 5% between 2000 and 2010, meaning that power unreliability in those years negated a significant amount of potential economic growth. The World Bank estimates that Ghana’s nominal GDP as of 2008 was approximately $16.1 billion, meaning that power outages potentially cost the economy more than US$320 million per year.

Supply interruption imposes a substantial cost on households because of damage to appliances and the spoilage of food and compromises public safety in the delivery of health care services, often with tragic consequences, and the greater the technology penetration into economic activities, the greater the economic losses. Direct costs to utilities, among other things, include cost of repairing damaged equipment, process restart costs, generation revenue losses, and reduced equipment’s life span.

A Way Forward

Some countries, successful in renewable electricity supply, have helped transform and sustain electricity supply. Countries such as the USA, UK, Iceland, Sweden, Costa Rica, Nicaragua, Uruguay, Denmark, Morocco, Kenya, Canada, Germany, Spain, Australia, China, and France developed solar energy policies that managed to increase solar power generation significantly (K.H Solangi et al, 2011).

In order to promote and ensure the rapid, effective and smooth development of renewable energy, the Malaysian government has formulated a series of policies on renewable energy development, including laws, regulations, economic encouragement, technical research and development, industrialized support and renewable energy model projects, etc. These policies provide significant motivation and interest for the development and use of renewable energy technologies. However, Malaysia’s renewable energy development policy has a few limitations:  lack of coordination and consistency in policy framework; less encouragement in the lower level, lack of regional policies innovation; unhealthy and incomplete financing and investment system; inadequate investment in technical research and development of renewable energies (K.H Solangi et al, 2011).

Learning from successes and failures around the world, renewable energy can provide Ghana with a viable alternative to its power crises, seeing that the country is endowed with abundant renewable energy resources, especially solar power. The Renewable Energy Act was passed into law in 2011 to provide the legal framework for the adoption of renewable energy sources into the generation mix. The Energy Commission should fully introduce the National Rooftop Solar PV Programme as a means of providing capital subsidy for the development of rooftop solar PV systems to residential facilities. The program will seek to help reduce the burden on conventional power generation facilities.

Sporadic efforts made are not adequate to improve the situation without strong state initiatives in terms of proper planning, program design, financial support, and institutional arrangement. There is a need for proper integration of local resources in hybrid technology combinations to ensure adequate, reliable, and affordable supply.

Efforts aimed at addressing some of these challenges include the ministry of energy developing the gas resources from the country’s oil fields to provide stability in the supply of natural gas to the nation’s thermal generation facilities.

The country has potential in smaller hydropower and renewable energy sources which when fully exploited would bring diversity into the country’s generation mix thereby curbing the heavy dependence on the Akosombo dam and the major thermal generation facilities.

“The views represented in this opinion piece do not necessarily represent those of the Willy Brandt School of Public Policy.”

REFERENCES

1. Ebenezer Nyarko Kumi. 2017. “The Electricity Situation in Ghana: Challenges and Opportunities.” CGD Policy Paper. Washington, DC: Center for Global Development. www.cgdev.org publication/electricity-situation-ghana-challenges-and-opportunities.
2. ISSER. (2015). Electricity insecurity and its Impact on Micro and Small Businesses in Ghana. Electricity Insecurity and Its Impact on the Economy of Ghana. Accra: Institute of Statistical, Social, and Economic Research.
3. Mathrani, S., Santley, D., Hosier, R., Bertholet, F., Braud, A., Dawson-Amoah, G., Reinoso, G. (2013). Energizing Economic Growth in Ghana: Making the power and Petroleum Sectors Rise to the Challenge. Retrieved from documents.worldbank.org/curated/en/ 485911468029951116/Energizing-economic-growth-in-Ghana-making-the-power-and- petroleum-sectors-rise-to-the-challenge
4. World Economic Forum, The Global Energy Architecture Performance Index Report, 2014. 
5. VRA. (2016). Wind Energy. Retrieved August 2017, from Volta River Authority: http://www.vra.com/our_mandate/wind_energy.php
6. Energy Commission of Ghana. (2016a). National Energy Statistics (2006-2016). Retrieved from Energy Commission of Ghana: energycom.gov.gh/files/National%20 Energy%20Statistics_2016.pdf
7. K.H. Solangi et al. / Renewable and Sustainable Energy Reviews 15 (2011) 2149–2163

~ The views represented in this blog post do not necessarily represent those of the Brandt School. ~