The power sector remains a key threat to the country’s development owing to rising costs of excess capacity from the various Power Purchase Agreements (PPA), the Africa Centre for Energy Policy (ACEP) has warned.
The energy policy think-tank in a statement noted that the cost of excess power currently stands at more than US$200million a year, and is set to reach over US$600million by 2020 if drastic measures are not taken to cancel, renegotiate, or defer some of the country’s pending power projects.
“The power sector still remains a major risk to Ghana’s economic progress because of excess capacity – which incidentally is also too expensive to encourage local demand growth, or for export,” said ACEP’s Executive Director, Benjamin Boakye.
Although it said it acknowledges that government, through the Ministry of Energy, has already cancelled some of the PPAs which would have deepened the country’s woes through unwarranted payments, it added that it is important for government to continue exploring measures to minimise the impact of such expenses on the economy.
ACEP, which commended government for withdrawing the renegotiated AMERI earlier this month – following a massive public outcry and the consequent dismissal of sector minister Boakye Agyarko – added that decisions of such nature are apt and will ensure the power sector does not derail the country’s economic prospects.
“We will submit a full picture of the threats in the sector to the president in the coming days – with proposed solutions,” ACEP’s statement noted. “In light of this reality, we monitor how the renegotiations are done to ensure they rather lessen the economic burden on Ghanaians.”
In November last year, government announced that it would be able to save US$7.217billion from cancelling 11 Power Purchase Agreements over a 13-year period, without giving details on the specific projects it was referring to.
But even before this announcement, the Vice-President, Dr. Mahamudu Bawumia, said following a review of some 28 of such contracts, cabinet had given approval for some to be cancelled and others deferred to 2025 and 2030; while others like Cen Power and Early power projects have been given the go-ahead to begin production.
He further indicated that they had saved the nation some US$300million at the time through the cancellation of about 20 agreements and a review of four others. This, he said, “has helped to reduce government expenditure”.
At the peak of the country’s power crisis – ‘dumsor’ between 2015 and 2016 – the government in a frantic attempt to overcome the crisis went for several Power Purchase Agreements, which were widely viewed as very expensive.
As of 2017, with all the power projects signed, the country’s total capacity was estimated to be 10,800 megawatts with demand around 5,000 megawatts.