… to solve excess capacity conundrum
Government has charged the Volta River Authority (VRA) to use its experience in electricity export to find markets for the country’s excess power capacity.
The country’s total installed capacity is 5,083MW with a peak demand of 2,7000MW. Of the total installed capacity, 2,300MW has been contracted on a take or pay basis, for which government pays about US$500million annually without usage.
The pay or take agreement between government and Independent Power Producers (IPPs) signed during the peak of the country’s power crisis – ‘dumsor’ – between 2014 and 2015 means that whether government uses the power or not, it still pays for it. Government, in a desperate attempt to cut down its losses, has been exploring foreign markets – mainly Ghana’s neighbours – to sell the excess power; but this has proven a difficult ask so far.
However, Senior Minister Yaw Osafo-Maafo – speaking at the launch of VRA’s 60th anniversary in Accra, implored the power generator and electricity supplier to help government find buyers for the excess power, given its experience in export of power to countries within the sub-region. “It is my hope that the VRA with its rich experience will explore the export market to reduce the burden of over-capacity on government,” he said.
On why government is desperate to export the excess power, he said: “The net effect is that government has had to pay US$500million annually for power generation capacity it does not need”.
Renegotiations
Since coming into power in 2017, the Nana Addo Dankwa Akufo-Addo-led government has consistently spoken of the need to renegotiate the pay or take agreements with IPPs in order to cut down the huge costs it brings to the state – although little success has been achieved so far.
For instance, Finance Minister Ken Ofori-Atta stated in his presentation of the Mid-Year Fiscal Policy Review of the 2019 Budget Statement and Economic Policy & Supplementary Estimates in Parliament that there was a need to renegotiate the contracts to avert the impending huge cost it will bring to the country in the upcoming years.
“All take-or-pay contracts will be renegotiated to convert to take-and-pay for both Power Purchase Agreements (PPAs) and Gas Supply Agreements (GSAs),” he said.
Similarly, in August last year government announced that it had begun collaborative consultations with IPPs to resolve the take or pay obligations hampering the country’s energy sector.
The three-month engagement, instituted by both the Energy and Finance ministries, was to help government find a permanent solution to the excess power conundrum – but nothing seems to have changed since Mr. Ofori-Atta made the disclosure more than a year ago.
