PRESS STATEMENT BY AFRICA CENTRE FOR ENERGY POLICY( ACEP) ON CHALLENGES FACING GHANA’S POWER SECTOR: THE LOAD SHEDDING POLITICS
1.0. Introduction
The main challenges facing the power sector in Ghana consists of generation and transmission risk which include the following:
a. Continuous reduction in the spinning reserves
b. Over reliance on hydro and gas
c. Transmission investment Challenges
d. Adequate regulatory framework in terms of pricing
e. Transmission and Distribution losses.
2.0. Dwindling reserve margin
The extra capacity that is required to be maintained in addition to the demand at any time is called the generation capacity reserve. This reserve allows the system to tide over any generating plant outages, errors in demand forecasting and any other faults or unplanned outages. Additional capacity therefore has to be maintained to meet the demand and any contingencies that may arise. The reserves margin in 2009 was about 9.7%, this has been wiped out between 2005/2006 as a result of the VALCO operation. It was increase from 5.9% in 2008 to about 10% in 2011/12 and has recently been wiped out again as a result of the fall in the gas supply by the WAGP.
3.0. Hydro and gas supply uncertainties
The Ghana Meteorological Agency (GMA) suggests the mean annual rainfall had peaked in 2011 and expected to start dropping beginning 2012. It is estimated that Higher inflows into the hydropower reservoir would have improved the overall power generation in case the gas supply reduces but unfortunately the GMA forecast has given rise to the rainfall uncertainties therefore reducing the possibility of increasing the level of the base load delivered by the hydro sector in the country.
Similarly the Gas supply reliability depends on internal problems in Nigeria and the country’s own future planed about gas usage. For example, Nigeria wants to increase her installed power capacity from 6000MW to 13,000 MW by close of 2012 and 15,000 MW by 2020. This puts constraint on gas supply since Nigeria will require 5 billion cubic feet per day.
4.0. Pricing
A financially sustainable power sector requires that the price of electricity allows for full cost recovery across the entire value chain. However, for a long time, price paid by consumers of electricity has been below cost of supply. The creation of the Public Utilities Regulation Commission (PURC) under the power sector reform was expected to bring an end to this problem. However the problem persists. The persistence of low tariffs has resulted in the VRA and ECG currently being in a precarious financial situation resulting in their inability to maintain and expand the system adequately, leading to poor quality of service.
Even though the PURC has increased tariffs a number of times in the past five years, prices have still lagged behind actual cost largely due to rapidly increasing crude oil prices. This situation resulted in deterioration in the financial state of the utilities, making it difficult for the utilities to raise the necessary financing for infrastructure development. In addition, low tariffs have made the sector unattractive to the private investors. The Government has been spending massive amounts of money to subsidize energy consumption due to tariffs being persistently below cost. Since 2004, Government has spent about US$900 million on fuel subsidies for VRA, which is more than the cost of building the Bui Dam. Refocusing this expenditure on infrastructure will therefore be of much more value in the long run.
The institutionalisation of transparent and stable regulatory regime is an answer to the success of a capacity long regime which will keep the lights on. It is very important to structure the tariff to reflect an acceptable rate of return on investment. The price should also meet the long term cost for the Simple reason of sustainability. The tariff should be structured to pass through increased cost due to operation and foreign exchange differentials
5.0. Investment in transmission and distribution
The operational efficiency of the generation, transmission and distribution utilities is critical in ensuring that the cost of supply is minimized as well as maintaining the financial sustainability of the sector. However, there is currently much room for improvement as far as the operational efficiency of the VRA and ECG is concerned. Currently, distribution losses are around 20% for both ECG and NEDCo, which is quite high by industry standards. The PURC benchmark of 18% used in setting tariff is yet to be achieved.
In the case of VRA, technical problems at its 330 MW combined cycle plant at Takoradi have resulted in the plant not being able to achieve an adequate level of availability. Since that plant is the most efficient of all existing thermal plants, its low availability means more expensive sources have to be operated to meet demand, increasing overall cost of generation.
My question is why are the people suffering, because the of the governments un-effected methods of producing quality electricity for its people. I have heard thru many people of your country that the government doesn’t even pay its own bills, so how do you want or even expect the people to pay when its own government will not pay for their usage of electricity. Kinda of calling the kettle black wouldn’t you say. My solution would be to fire all the people in office and start again with new people who will not steal from their own people. And if they do they do than they need jail sentence, or put in front of a firing squad and shot to death,…to show the people that stealing is not OK, no matter who you are since everybody was created equal in the eyes of the lord.