Ghana’s energy crisis: is there hope for sustainability?
If there is one word which has resonated in the daily conversation of our national life, that surely must be power.
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For the ordinary person on the street: urban dweller, entrepreneur, investors looking to exploit new opportunities, the mother at home - power simply put, means reliable electricity. In an era of global competitiveness, power generation has become one of the critical ingredients for the realisation of Ghana’s development.
Ghana’s economic growth has been severely challenged due to the huge power deficit and increasing demand for electricity outstripping supply. Despite growing investor attention and attraction to opportunities here, the lack of capacity to generate enough power for industrial growth has been a disincentive.
The reality
Currently, installed capacity for power generation is estimated at 1,960 megawatts (from hydro and thermal sources) growing at about 10 per cent annually. In the medium to long term, an additional 2000 megawatts will be needed in order to catch up with demand.
Unfortunately, efforts to increase supply have been hampered by limited fuel supply due to rising costs of light crude oil and unstable rainfall patterns affecting hydro-generation. This is further compounded by irregular supply of gas from Nigeria which renders thermal plants such as the Asogli Power Plant – which provides 180 megawatts of gas-run power - non-operational.
This discrepancy between supply and demand has forced a dependence on Light Crude Oil which is costly. Ghana is estimated to spend about $1bn annually on light crude oil for power generation, resulting in an uncompetitive private sector characterised by high cost of production, high price of goods and services and low patronage of deliverables.
We need to double our energy capacity within the next four to eight years. Ghana, currently, will have to spend about 150 per cent more to purchase light crude oil to fuel power-producing according to the Volta River Authority following the suspension of gas supplies from Nigeria on Tuesday, September 17.
Gas supplies from Nigeria through the West African Gas Pipeline have been far below contracted quantities and very unreliable due to interrupted supplies. These major technical challenges have compounded the situation. Besides, Nigeria’s own natural gas demand is growing exponentially and as VRA has stated publicly, Ghana cannot rely on the West African Gas Pipeline for future energy security.
Gas from Ghana’s own fields thought to be two decades behind schedule, is not likely to be available in sufficient quantities to meet the demand for another 10 years, according to experts. Clearly, the huge price the economy pays for the power deficit due to inadequate supply calls for immediate action to restore the path of economic growth and development. With domestic and industrial demand estimated to be 10 -15 per cent year on year, it is obvious that innovative options of identifying new sources of power generation are pursued.
Solutions
Thus, the role of independent power producers (IPPs) becomes crucial. Yet, many IPPs find themselves hampered by a credit crunch and lack of sufficient credit to import fuel for power generation. The Atuabo Gas Processing plant, when it becomes operational by the end of the year, will only meet a portion of demand in the Aboadze enclave - leaving the eastern corridor - Tema and beyond stranded. For the next 10 – 15 years therefore, Tema will urgently need an alternative gas supply to fuel power generation and industrial growth.
Liquefied Natural Gas (LNG) is priced at a 20 -25 per cent discount compared to Light Crude Oil, and if brought to the shores of Ghana will fill in the gap. The Tema district’s existing power suppliers – Volta River Authority, Asogli Power Plant, CENIT and others have neither the commercial nor financial capacity to respond to the government’s scheduled increase in power generation to 5,000MW by 2016. Thus, LNG initiatives such as the Quantum Power Ghana Gas Tema LNG project should be welcomed and supported. Such initiatives have the huge potential to propel economic growth.
Quantum Power is a pan-African industrial investment platform focused on power generation, energy and related infrastructure and commodities, with offices in six African countries, as well as London and Cyprus. Quantum Power Ghana Gas is Quantum Power's entity dedicated to developing the Tema LNG importation, storage, regasification and delivery facilities.
In July 2014, Quantum Power Ghana Gas, a subsidiary of Quantum Power, signed an agreement with Golar LNG Golar to provide the project with the required Floating LNG Storage and Regasification Unit ("FSRU"), as well as technical, engineering, and design and construction services. First deliveries of LNG are set to begin by early 2016. Quantum Power has recently received technical assistance from U.K.- based civil engineering firm HR Wallingford, for an operational viability assessment study on its proposed LNG storage, regasification and delivery facilities at Tema, Ghana.
Expected advantages
A functioning LNG project in the country offers great potential for the economy. Assured power supply helps to sustain investor interest thus ensuring the security and protection of Ghana’s manufacturing sector. In fact, an LNG terminal is security for industries in the country. It lowers fuel costs by 20-25 per cent (at least $200 million / year) encouraging expanded capacity to supply the industrial and social needs of Ghana and its neighbours.
While mining companies forecast drastic cuts in expenditure and are aggressively trimming their labour force, LNG not only holds short -term promise to supplement current renewable sources of power generation, but is flexible without additional infrastructure investments. This means that one can move from a base load of 250 MMscf up to 750 MMscf (and back) to match demand in Tema and beyond. It is the lowest cost and quickest gas solution to deploy. Initial gas supply by Quantum Power Ghana Gas is scheduled to come on stream in 2016. Ghana will be living up to its regional potential and become a regional hub for supplying LNG to its neighbours.
LNG will provide a boost to energy supplies, alleviating immediate pressure and ultimately strengthening the government’s position in negotiating gas prices with upstream investors. Further, it allows for properly planned infrastructure development, opening new opportunities for regional energy integration and trade in LNG.