Review of power purchase agreements to save Ghana $700 million — Agyarko
Energy Minister Boakye Agyarko says the government has decided to review the various power purchase agreements to save the country from losing $700 million annually.
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Addressing the maiden Ghana Energy Summit in Accra last Tuesday, Mr Agyarko said “if all the power purchase agreements currently in place were implemented, the nation would incur annual extra capacity charges of nearly $700 million.
So far, he said, about 30 power purchase agreements had been reviewed to ensure value for money.
He said the numerous power purchase agreements signed by the previous administration during the power crisis last year had created huge indebtedness for the energy sector.
The summit, being attended by energy experts and other stakeholders, is intended to discuss the challenges and opportunities in the sector with the view to finding solutions to the challenges.
The two-day meeting is also providing a platform for the participants to exchange ideas and share experiences that can be used to fashion comprehensive policies and strategies for the energy sector.
The meeting will also discuss investment opportunities available in the sector and provide avenues for targeted and strategy-driven investments rather than the current deal-driven approaches.
The challenges
Mr Agyarko said significant progress had been made with respect to shoring up generation capacity, modernising transmission and distribution infrastructure, as well as increasing citizens’ access to electricity in the power sub-sector.
The petroleum subsector, he said, had also witnessed accelerated development of legislation, institutional reforms and aggressive downstream deregulation aimed at ensuring that the sector delivered enhanced value to Ghanaians and investors.
Despite those achievements, he said, the energy sector was still beset with daunting challenges which were as a result of policy failures and weaknesses.
“The situation has been exacerbated by unacceptable distribution losses, utilisation of expensive short-term loans by power utilities among other issues, resulting in a huge sector indebtedness of nearly $2.4billion,” he stated.
However, Mr Agyarko said the government was working with stakeholders to address those challenges, including a moratorium on new thermal capacity additions, and the exploration more transparent and competitive procurement processes for renewable energy capacity additions.
“We are committed to addressing these policy weaknesses in order to create an energy sector with a healthy balance sheet that will make it possible for us to keep the lights on and keep transportation running,” he stated.
Energy sector
Ghana’s energy sector has seen significant growth over the years. The petroleum upstream sub-sector has witnessed ample progress by boasting two offshore producing fields and a third scheduled to come on stream in the third quarter of 2017.
The power sub-sector has also seen some significant progress in spite of the fact that it faced some challenges including power generation, supply challenges and huge debts which threatened the survival of the power utilities.
Although the country had a total installed capacity of hydro and thermal plants of about 2, 434 megawatts (MW) to meet the current demand of 2,225MW, the non-availability of fuel for power generation has always been the bane of the country’s power challenges.
Finding solutions
To reduce the burden on the national grid and accelerate electricity access, Mr Agyarko explained that mini electricity grids and stand-alone solar systems were being prioritised for remote communities, while rooftop solar systems were being promoted in all government buildings to reduce their electricity bills.
In the petroleum sector, the minister indicated that efforts were being intensified to accelerate oil and gas exploration and development and also whip up investor interest in less explored hydrocarbon basins.
Additionally, Mr Agyarko said, the ministry and stakeholders were working to ensure sustained availability of petroleum products at affordable prices, while minimising hazards associated with the industry, especially, in the usage and handling of liquefied petroleum gas (LPG).
He added that the government was committed to fighting the menace of illicit transactions that had recently hit the petroleum sector.
A Deputy Finance Minister, Charles Adu Boahene, said the power crisis which faced the country in the past years had impacted negatively on the economy leading to a sharp decline in economic growth from 14 per cent in 2011 to 3.5 per cent in 2016.
He said the government was prioritising the energy sector in order to embark on its industrialisation agenda to bring the economy back to the path of growth.