Consider alternative sources of power generation

Rising debt levels in the country’s energy sector are not a major worry to only the government but also the business community and the public at large.

It is feared that if measures are not instituted to control the liquidity and operational challenges in the country’s energy sector, they could trigger the next round of the banking crises.

 It, therefore, comes as welcome news the announcement by the government that it will, from August 1, 2019, pay independent power producers for only the power the country consumes.

Currently, Ghana pays the IPPs for the power they generate for the country, including that not consumed, under a take-or- pay agreement.

According to the Minister of Finance, Ken Ofori-Atta, the government would renegotiate such agreements and seek parliamentary ratification.

The government has accused the erstwhile NDC administration of signing some controversial power agreements which seem to be shortchanging the country.

The government claims that, per the agreement, the country is compelled to pay the IPPs for the power they generate but which is not consumed.

The energy sector debt, which hit about $2.4 billion, is one of the government's major challenges, as it affects a greater part of the economy.

For us, the challenges in the energy sector are due to a multiplicity of factors, including cash flow problems and inefficiencies that collectively make the sector a threat to fiscal stability.

Weak governance and an inadequate tariff structure are other challenges that have contributed to plague the sector.
 The Daily Graphic is mindful of the fact that up to 30 per cent of electricity tariffs were cut in March 2018, which has added to the burden of the sector and contributed to the financial problems.

The Electricity Company of Ghana (ECG), the Ghana Grid Company (GRIDCo) and the Volta River Authority (VRA) have been inefficient since 2014 and, as a result, registered negative average returns on equity over the last four years.

We note that the situation is not limited to the energy sector but extended to the gas sub-sector, where an off-take agreement for gas supply from the Offshore Cape Three Points field is impacting negatively on public finances.

Solving Ghana’s electricity challenges will require measures, including, but not limited to, diversifying the generation mix through the development of other hydro power and renewable energy sources for which the country has huge potential, expanding the prepaid metering system to include all public and private institutions, restructuring the tariff regime to ensure that the utility companies can recover their cost of generation and promoting energy efficiency programmes.

It is our view that the country has potential in smaller hydro power and renewable energy sources which, when fully exploited, will bring diversity into its generation mix and thereby curb the heavy dependence on the Akosombo Dam and the major thermal generation facilities.

The role of renewable energy in helping to achieve electricity self-sufficiency cannot be over-emphasised.

 The introduction of the Renewable Energy Act has provided the impetus for the development of the sector.
 
However, the government needs to strengthen the enforcement of the act and the various sub-regulations, as well as introduce more incentives to attract investments into the renewable energy space.