Energy Bulletin with Bismark Ameyaw and Amos Oppong

A proposed guideline for foreign investors to tap into the solar resource in Ghana: the case location and market size

In our previous report, we shed light on the role of government legislation and statutory requirement as a prerequisite in harnessing the solar energy in Ghana. In this submission, we continue the exposition of proposing a guideline for foreign investors by dwelling more on the importance of efficient location and market size.

Location

After utilizing the legal and appropriate means to successfully securing a license from the designated departments, it stands to reason that another key issue for success in solar business in the region centres on the location of the firm. Proximity to and availability of the basic raw material – sunshine – is paramount to supplying production plants with enough workload and eventually increasing production. Solar energy holds boundless promise in the provision of energy for a greater proportion of Ghana’s energy demand but its full potential is yet to be realized in Ghana. The location of the country and the trends and patterns in her average sunlight in a calendar year makes Ghana a region with a high probability of success in solar energy. Sunlight is prevalent in two broad areas around the earth’s plane between longitudes 15° north and 35° south [1]. Regions located between these parallels experience minimum radiation of 5kWh/m2/day[2,3]. These regions are also positioned on the equatorial side of the world’s arid deserts and have below 25cm of rain in a year. In some countries located between these regions, over two-thirds of their areas are scorched and experience more than 3000h of sunshine per annum; with at least 90% of such heat energy as direct radiation from the sun. Radiations from these areas place countries in this zone well suited for applying solar energy. In West Africa, the most favourable region for the purpose of solar energy application is in the equatorial belt between longitudes 15° north and 15° south, and Ghana lies between these strands of belt. These areas experience high humidity, relatively frequent cloud cover, and dispersed radiation of 2500h of sunshine per annum with least radiation of 3–5kWh/m2/day throughout the year [4]. To that effect, Ghana’s location in this region guarantees her for prioritizing strategic utilization of solar energy. Ghana’s average duration of sunshine varies from a minimum of 5.3h per day in the cloudy semi-deciduous forest region to 7.7h per day in the dry savannah regions. The monthly average solar radiation in different regions of the country ranges between 5.6kWh/m2/day in the Northern, Upper East and Upper West regions; and 4.4 kWh/m2/day in the Western, Central, Volta, Eastern, Ashanti and Greater Accra regions [5]. In considering a viable source of solar energy, these regions will function as great source of raw material for solar energy operations.

Market size

One key factor in considering the location for solar business is a good insight into the financial and economic characteristics of the targeted market. Market size, household characteristics, energy demand, income level, willingness to adapt, literacy rate and expected competition are among the key peripheral factors to be considered in choosing the location. Financial- and economic-related issues considered with regards to making decisions on location strategy for emerging or existing firms vary greatly at both intra-industry and inter-industry levels. These decisions are always a product of a company’s inimitable strategy, positioning, and core competencies. Nonetheless, in most cases, similarities and patterns do emerge among companies with similar unique requirements and those that are at similar points on the industry maturity curve. During the location selection decision process, companies that tackle it in a rational and thoughtful fashion will typically seek to minimize their operating costs, enhance infrastructure, improve operating conditions, and abate risk. An ideal blend of these costs and conditions and an optimal choice vary both by industry and levels of maturity.

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Gyamfi, Krumdieck, and Urmee [6] and Palensky and Dietrich [7]  argue that there is no consensus on the best approach to estimate energy demand precisely, but other scholars argue that the residential solar energy consumption in a particular year (Et) can be expressed as the product of the total number of households (Ht) living under the same roof, the electrification rate (NCt / NHt) and the average consumption per unit consumer (St / NCt) units; thus;

t = *  ………………………………………………………………(1)

Ghana relies heavily on electricity for energy and deducing from equation (1) the market size and level of demand can be estimated by forecasting the number of households, a scenario for the electricity consumption per consumer and the electrification rate [8]. Moreover, statistical data on consumption patterns can be obtained from public sources such as the Ghana Statistical Service, the Bank of Ghana (BoG), the Energy Commission and trade associations. The BoG in an effort to readily make data available publishes average retail interest rates, consumers and market indexes and other useful information annually. An annual report on the consumption and penetration rate published by the Energy Commission gives a reliable data for analyzing the potentials of the market. Data mining, machine intelligence, strategic market research and information from customers of existing firms could also be used to access good information on market size as such are often overlooked by existing firms [9]. Other public sources of information such as websites, annual reports, and conferences; and informal means such as third-party research firms, can be used to compile rich information. Lüdeke-freund [13]  recommends market research to be undertaking using existing or prospective customers as focus groups but Bohlmann, Spanjol, Qualls & Rosa [14]; Hoffmann [15]; Javalgi, Martin & Young [17]; and Kanters, Horvat & Dubois [16]  posit that although such research is usually used in the product development phase to meet the needs of customers, it can also be used to estimation market size. Due to the growing numbers, consumers are constrained to getting access to credits and hire-purchase and such has the tendency to reduce market size [18]. On social and household behavioural characteristic, consumers may show certain naïve attitudes towards products they are not familiar with. To help achieve energy policies the government can use directives (e.g., changing building regulations to require the installation of renewable and environmentally-friendly sources energy into new buildings) to correct for market failures [19] and leverage on creation of awareness by sensitizing consumers on the benefits of clean energy. Sound regional feasibility studies in the various regions can reveal the region with high tendency to adapt to solar power and demographic characteristics such as how educative consumers are on solar power uses.

 

Bismark Ameyaw

BISMARK AMEYAW is a researcher at University of Electronic Science and Technology of China and a referee to a number of prestigious peer-review journals. He specializes in modelling and forecasting the dynamic links in energy policies and the economy. He writes, teaches and consults on management and econometric issues. He serves as an editorial board member and a reviewer for a number of prestigious international journals. You may contact him through: E-mail: 201714110101@std.uestc.edu.cn; kofiameyaw9@hotmail.com; 3101153683@qq.com

 

AMOS OPPONG is a researcher at University of Electronic Science and Technology of China and a referee to a number of prestigious peer-review journals. He specializes in modelling and forecasting the dynamic links in environmental, energy and the economy and policy analysis. He has rich research experience in diverse fields assisting research projects on mining, agriculture, sectoral energy demand, economy-wide energy demand and supply, trade, environmental cooperation, air pollution and climate change. You may contact him through: Email: 201714110129@std.uestc.edu.cn; oamos@rglobal.org

 

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