US$25m paid monthly for unused power

The country pays US$25million monthly for unused power, as existing Power Purchase Agreements (PPA) enjoin the state to pay for all megawatts produced whether they are consumed or not, Energy Minister John Peter Amewu has told Parliament.

Speaking on the floor of Parliament on Friday, March 15, 2019, the sector minister said: “The issue of ‘take or pay’ without considering what Ghanaians will pay is gone. Under this president’s watch, we are beginning to consider a regime of ‘take and pay’. You cannot continue to pay for goods and services that you are not consuming; that era has gone”.

According to him, due to the numerous PPAs, the country has been saddled with overcapacity payments averaging about US$25million monthly.

To minimise this, he said, “We are engaging in renegotiating the PPAs to bring these costs down to the barest minimum in the interim.

“We believe that the issue of take and pay must begin to trickle down to every Ghanaian. We will continue to make sure that the highly excessive regime of tariffs being imposed will no longer be witnessed by any Ghanaian.”

Gas purchase agreements have been signed without considering what the benefit will be, and this government has taken the trouble to negotiate the OTCP price – with the price brought down to a margin of US$2. That translates to about US$50million relief per annum for the consuming public, the minister noted.

Ghana’s power system experienced a number of network disturbances between March 12 and 13, 2019 – which resulted in the interruption of power supply to customers. The disturbances were due to challenges at the newly-commissioned Accra Central substation.

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In his statement, he indicated that these challenges have occurred when there is already an on-going five-day outage that has been imposed on the 330kV transmission line between Tema and Aboadze for relocation of two towers on the line, at the request of the Ghana Highway Authority to enable construction of a new interchange at Pokuase.

“The fundamental cause of the blackout is the ongoing construction of the road interchange at Pokuase, which has necessitated the diversion of GRIDCo’s 330kV transmission line towers that run from Tema to Aboadze in the vicinity.

“This requires creating an outage of the entire line to undertake the diversion,” he said.

The power system of Ghana has an installed generation capacity of 4,775MW. Available generating capacity is 2,641 MV currently, with the maximum peak demand recorded so far in 2019 at around 2,600MW.

It is expected that when some unavailable plants are brought back into operation, the quantum of available capacity will increase.

“For the power system to function effectively, all the components in the value chain – namely generation, transmission and distribution – must be in good shape. Therefore, you may have enough available capacity, but if the transmission system experiences a challenge, just like we witnessed in the past few days, we occasionally experience temporary outages. This is also true if the transmission system is intact but faces inadequate generation.”

The private sector participation in ECG that is meant to bring about improvement in the distribution subsector became effective on March 1, 2029, with the concessionaire, Power Distribution Service (Gh) Limited, taking over the assets and operations of ECG for a period of 20 years.

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To reduce dependence on liquid fuels and their attendant costs, the Offshore Cape Three Points (OCTP) Sankofa project was developed to utilise gas for power generation as a cheaper and cleaner substitute for liquid fuels.

“The OCTP Sankofa gas is ready, but the facilities to offtake the gas are not. We are currently making efforts to relocate the 450MW Karpowership, currently at Tema and running on Heavy Fuel Oil (HFO), to Sekondi and enable an offtake of 90MMbtu per day – representing about 50% of OCTP gas production.

“This will minimise onerous potential ‘take or pay’ obligations to GNPC and government under the OCTP agreement,” he noted.

The movement of the 450MW Karpowership from Tema to Sekondi-Takoradi will lead to the avoidance of gas transportation cost of US$1,68/MMbtu. That is, US$55million per annum the country would have paid for the transportation of gas.

In spite of the minister’s statement, the Member of Parliament for Yapei Kusawgu-John Jinapor, maintained that the power sector as it stands now is financially bankrupt; and that the current debt overhang stands at GH₵13billion.

These debts are mainly owed to GRIDCo and the Volta River Authority.

He indicated that government is moving to renegotiate a new power purchase agreement, the ‘take and pay’ arrangement which is expected to be more cost-effective, Energy Minister John Peter Amewu has told parliament.

The Energy Minister has accused the previous NDC government of arranging a ‘take or pay’ agreement which he says has incurred more cost to the country.

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