Coal Power: The low cost option to boost investor confidence
In the AGI’s Business Barometer survey for fourth quarter, 2015 launched on Tuesday, February 9, 2016, 53 % of the over 500 CEO’s surveyed, cited high cost of electricity as their number-one challenge, followed by inadequate power supply.
The manufacturing and services sectors expressed worry over the impact of high cost of electricity on their businesses. Small-to-medium size enterprises were more concerned about the high cost of power whilst ‘large’ firms singled out inadequate supply of electricity ahead of cost (B&FT, 2016).
AGI CEO, Seth Twum Akwaboah, expressed worry over high cost of power to emerge tops in the fourth-quarter rankings when it did not even feature in the top-five challenges for the third quarter – certainly, thermal power generation is not cheap.
The addition of 1,055 MW of thermal power generation end of 2015 brings the total installed capacity to 3,892 MW at a per capita usage of 382 kWh. This implies that, about 59 % of current electricity supply in Ghana is derived from thermal sources consisting of an expensive fuel mix – LCO, HFO and natural gas. The new thermal generation addition includes; VRA Kpone Thermal Plant – 220 MW, Sunon-Asogli Phase II Expansion – 360 MW, Karpower Ship – 225 MW and Ameri Power – 250 MW. Indeed, the fast-track option of thermal generation is timely – mitigating the impact of dumsor on the Ghanaian economy.
Consequently, the Public Utilities and Regulatory Commission (PURC) in December, 2015 announced hikes in electricity and water tariffs of up to 59.2 % and 67.2 % respectively – increases which drew public uproar from both the AGI and organized labour (TUC). Subsequently, Government intervened by a 15 % reduction in electricity tariffs to “lifeline consumers” – consumers of up to 50 kWh or less (B&FT, 2016).
The Paris-based International Energy Agency (IEA) (2013) defines an “initial threshold” for energy access to be 250 kWh per year for rural households and 500 kWh per year for urban households. In terms of access and per capita usage of electricity, Ghana is far ahead in the ECOWAS sub-region with over 80 % access and per capita usage of 382 kWh. Its closest rival in the sub-region is Cote d’Ivoire with 252 kWh and Nigeria – 142 kWh ((World Bank, 2016). However, a lot more remains to be done to alleviate the economy out of dire energy poverty, create wealth and prosperity through development of its energy intensive industries – gold mining and refinery, iron ore and bauxite processing into aluminium; VALCO still operates at one Port-line, which is 25 percent.
The answer to cheap, affordable and reliable electricity to fuel industry remains large scale hydro, coal and nuclear power. Nonetheless, Ghana has exhausted all its large scale hydro potential after the construction of Akosombo, Kpong and Bui dams. Natural gas will play a role but limited since Ghana’s proven reserves is only 3 trillion scf (400 MMscf/d) and largely under development.
It is therefore gratifying that, the Volta River Authority in collaboration with the Shenzhen Energy Group of China is currently pursuing the construction of the 700 MW Supercritical Coal Fired-Power Plant to be sited in Aboano in the Ekumfi District of the Central Region. The project, estimated to cost US$1.5 billion is scheduled to start in August, 2016 with commercial operation planned for 2020 This is against the background that, world coal use is on the rise.
According to Rachel Kyte, Vice President and Special Envoy for Climate Change, World Bank (2014), “Access to energy is absolutely fundamental in the struggle against poverty… without energy, there is no economic growth, there is no dynamism, and there is no opportunity”.
China, Germany, India, Indonesia, Japan, Pakistan, Poland, Russia, and South Korea – are all at various stages of planning to build a total of 550 gigawatts (550,000 MW) of new coal-fired capacity over the next 25 years. About 400-gigawatts of these is planned for China alone, the world’s second largest economy and a major trading partner to Ghana.
Given the recent history of coal and the ongoing surge in global coal use, as well as, the high cost of renewable energy deployment, there is little reason to believe that any of the much-taunted international efforts at reducing coal use will yield the much needed dividends (Bryce, 2014).
Furthermore, the countries with the largest coal reserves are those with the largest and advanced economies – the United States of America (U.S), China and Germany. The U.S is home to the largest coal reserves, followed by Russia and China (World Coal Association, 2016).
Vaclav Smil in his 2008 book titled, “Global Catastrophes and Trends,” argues that:
“There is no urgency for an accelerated shift to non-fossil fuel world; the supply of fossil fuels is adequate for generations to come, new energies are not quantitatively superior, and their production will not be substantially cheaper. The plea for an accelerated transition to non-fossil fuels results almost entirely from concerns about global climate change.….”
The current 382 kilowatts-hour per capita usage of electricity in Ghana remains very low by global standards. The country should therefore leverage on the advantages of coal energy to attain 500 kWh in the short-to-medium term and a per capita usage in excess of 1,000 kilowatt-hours in the medium-to-long term. Apart from Ghana’s rich mineral resources which require energy intensive industries to unlock, modern cities depend on cheap, affordable and reliable electricity to develop efficient rail, road and air transportation, communication, water and waste water, and environmental management systems to service industry and commerce to boost economy activity – the time to act aggressively on coal is now.
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