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US$30m spent on excess electricity capacity

BY: Gifty Owusu Kwarteng
 Mr John Peter Amewu, Energy Minister, addressing the forum. With him is Mrs Vicky Bright, Managing Partner and Co-Founder Addison Bright Slaone
Mr John Peter Amewu, Energy Minister, addressing the forum. With him is Mrs Vicky Bright, Managing Partner and Co-Founder Addison Bright Slaone

The government losses close to US$30 million annually due to excess electricity capacity in the country, the Minister of Energy, Mr John Peter Amewu, has indicated.

He said that amount which was being borne by consumers was expected to rise to US$403 million in 2020 and US$493 million by 2021 if nothing was done to curb the situation.

As a result, he said the President had directed that the ministry should investigate and find out what the problem was since the country could not continue to pay such a huge cost for excess capacity.

Mr Amewu was speaking at a forum held by the American Chamber of Commerce (AMCHAM), Ghana, in Accra last Friday, dubbed ‘Energy sector perspective: vision and strategies for a sustainable energy sector in Ghana’.

“Every power sector needs some elements of reserved margin for emergencies and between 15 to 20 per cent is allowed margin but in situations where excess capacity is around 50 per cent, then it calls for questioning and some analysis,” he pointed out.

Termination of 11 PPAs

He said based on the President’s directive, a team was put together to investigate the situation and it came out that the Power Purchasing Agreements (PPA) in the energy sector far outweighed what was required.

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Due to that, he said the ministry decided to invite some of them and 11 of them had been put on hold for termination.

He said most of the PPAs that came on board did not go through any competitive process of negotiations and did not offer value for money.

“What we, therefore, intend to do is to look at a PPA that will come on take and pay basis and not a take or pay basis,” he said.

Review of charges

Mr Amewu also noted that the ministry had opened discussions to invite all the PPAs to review their charges.

He said those discussions were currently ongoing, with most of them expressing their willingness to review their charges.

Local content policy

The energy minister also pointed out that the government was yet to pass a local content policy, which was currently awaiting approval by Cabinet.

“We are coming out with what we call local content policy and Cabinet has given a subcommittee to work on the process to be approved by the main Cabinet,” he said.

He said they were drafting a Ghanaian participation concept to the market to make sure Ghanaians took charge of their own resources.

“Ghanaians must insist that we have the capacity to build our country. Even though we do not have financial capacity, we can procure capacity because we need the maximum benefit of our natural resources,” he said.

He added that natural resource was key for every country that wanted to achieve some sort of sustainable development and, therefore, there was the need to use our natural resource to develop the country.