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Ghana (2014)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

Most Ghanaians rely on biomass sources, particularly wood fuels and charcoal, for household needs. Government statistics place consumption of biomass fuels at slightly more than 60% of total energy consumption in Ghana. However, as part of the Ghana Shared Growth and Development Agenda, Ghana would like to reduce reliance on wood fuels and charcoal by expanding access to the national electric grid and developing oil and gas resources.

In 2012, the total grid electricity generated in the country was 12,164 GWh.  The total electricity made available for gross transmission in 2012 was 12,164 GWh as against 11,200 GWh in 2011. The 2012 generation comprised 8,071 GWh (67%) of hydropower and 3,639 GWh (33%) of thermal power. Although hydropower generation share decreased by about 0.5% over 2011, energy produced increased by about 510 GWh in 2012 due to significant water inflows into the Akosombo reservoir.

In 2010, the industrial, residential and commercial sectors accounted for 46%, 40% and 14% respectively of the total electricity end-use in Ghana.

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Reliance

After discovering the Jubilee oil field in 2007, Ghana's energy sector has expanded considerably. The field came online in 2010, and production in Ghana has since jumped from 7,000 barrels per day (bbl/d) in 2009 to 78,000 bbl/d in 2011, and 80,000 bbl/d in 2012. Tullow, the field's operator, experienced technical problems at the field that caused production to fall well below output goals in 2012. Proved crude oil reserves are 660 million barrels, as of January 1, 2013. However, given recent discoveries and further oil exploration, proved reserves are expected to rise. Ghana has about 800 billion cubic feet (Bcf) of proved natural gas reserves, although the country does not currently produce dry natural gas. Ghana plans to build a natural gas pipeline to pipe associated gas at oil fields, which is currently flared and reinjected.

Until 2011, Ghana was a non-oil producing country and depended largely on crude oil export to meet national demands. The discovery of oil is expected to stimulate economic growth and reduce poverty in Ghana. The Tema Oil Refinery is the only refinery in Ghana and it has a 45,000 Barrel-Per-Stream-Day capacity. Approximately 70% of petroleum product demand of Ghana is met by the Tema Oil Refinery‘s supply, while the remaining 30% of demand is supplemented by imports of petroleum products.

Ghana imported 29 Bcf of natural gas in 2011, mostly from Nigeria. Some of those imports came via the West African Gas Pipeline (WAGP), which runs East to West from Nigeria to Ghana.

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Extend network

While 72% of Ghana’s population has access to electricity, the Northern, upper East, and upper West regions have access rates of 44%, 30%, and 32%, respectively.

The Ministry of Energy in 1989 instituted the National Electrification Scheme (NES) as Government’s principal policy to extend electricity to all parts of the country over a 30-year period from 1990-2020. 643 communities were connected to the national grid in 2012, bringing to the total of communities connected nationally to about 5,500 and a national average coverage of about 72% as of December 2012, just as in 2011 due to population growth catching up with the rate of electrification. All regional and district capitals have been connected to the national grid. According to the Ministry of Energy, over 3,000 communities earmarked for electrification since 2011 would continue. Also, funding arrangement had been secured for about 2,000 communities earmarked for electrification in 2013 and beyond.

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Capacity concerns

The power sector faces two challenges arising from forces external to the sector: the lack of adequate and secure quantities of reasonably priced fuel for power generation, and the lack of adequate public funds to finance the sector’s investment requirements. These challenges are exacerbated by the poor technical and financial performance of the Electricity Company of Ghana (ECG) and Volta River Authority (VRA), and policies and practices that seriously damage the financial health of ECG, VRA and the Ghana Grid Company Limited (GRIDCo).

In the past 15 years, Ghana has added about 1,000 MW of thermal generation capacity. As a result, Ghana’s current generation capacity of 2,125 MW is made up of about 50% hydro and 50% thermal plants. Nevertheless, inadequate and unreliable power supply remains a major constraint to future economic growth.

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Renewable energy

Solar
The solar resource is abundant in Ghana. The monthly average solar irradiation is between 4.4 and 5.6 kWh/m2/day, with sunshine duration of between 1,800 and 3,000 hours per annum. However, till recently, little was done to exploit this resource for grid-connected power generation. Solar power has considerable potential to serve households in un-electrified villages.

VRA has just completed a small 2-megawatt-peak (MWp) solar photovoltaic (PV) grid-connected plant as a pilot project in Navrongo in the Northern Electricity Distribution Company (NEDCo) areas of operation, which should be commissioned later this year. Four sites in the environs of Kaleo (near Wa), Lawra, Jirapa, and Navrongo have been identified and acquired for a total of 10-MWp PV plants. VRA is seeking concessionary funding to develop the remaining 8 MWp.

Wind Energy
Ghana’s best wind resources are found primarily along narrow stretches of its eastern coastline. Along the coastline, the speeds (mostly 6–7 meters per second [m/s] at 50 m) are classified as “marginal” for wind generation. Nevertheless, grid-connected wind power is likely to be cheaper than grid-connected solar power. Clearly, it will be several years before the full extent to which Ghana’s wind resource is technically and financially viable for development on a large scale becomes clear. Yet, it is already evident that wind power is not likely to prove to be a substantial contributor to the power supply in the next decade.

Biomass & biogas
Biomass is Ghana‘s dominant energy resource in terms of its endowment and consumption. Approximately, about 20.8 million hectares of 23.8 million hectare land mass of Ghana is covered with biomass resources. Biomass fuels in Ghana mainly comprise of charcoal, plant residues and wood fuel. Wood fuel is the major form of biomass used as energy source for both domestic and commercial purposes in Ghana; about 90% of rural households depend on wood fuel and other biomass resources for domestic purposes (cooking, and heating, etc).

Wood fuel is the dominant and cheapest fuel available on the Ghanaian market; the production, transportation and sale of wood fuels are all undertaken by the private sector. There is no official government pricing regulatory body responsible for setting the prices of wood fuels in Ghana; rather the pricing is dependent on the supply and demand conditions.

These resources have not yet been developed for generating electricity in Ghana, and there are no projects in an advanced planning stage. Some developers are undertaking feasibility studies for biomass projects.

Hydro
Ghana has significant hydropower potential, and is already tapping this potential with its Akosombo, Kpong and Bui plants, which provide the majority of electricity in the country. Hydropower potential is estimated to be about 2,420 MW, and in addition to the large-scale Bui plant under construction, 21 additional hydro sites have been identified but not yet developed. Ghana is looking to diversify its power resources, as its reliance on hydroelectricity make it particularly vulnerable to drought.

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Energy efficiency

The growth in the demand for fuel-wood and charcoal is estimated at 3% per annum. Electricity demand, on the other hand, is growing between 6%-7% annually while consumption of petroleum products is estimated to increase at about 5% per annum. Energy efficiency and conservation can help reduce these high growth rates.

The losses in the production, transportation and use of energy are also high. System losses in electricity distribution are about 25% while wastage in the end-use of electricity is estimated at about 30%. Reduction of losses in energy supply and more efficient use of energy would also reduce demand for energy and delay investment in energy supply infrastructure.

Efforts, in the past, have been made by the Ministry of Energy and other agencies to promote energy efficiency and conservation in homes and industries. However, These efforts have not resulted in sustained adoption of energy efficiency and conservation in the country owing to a number of financial and institutional obstacles. Empirical evidence also suggests that pricing of energy services has been successfully used to encourage consumers to adopt measures to conserve energy and use energy efficiently. In order to encourage energy efficiency and conservation in the development of the sector requires new innovative interventions to deal with the challenges.

Industry

  • Energy Demand Management Program – 30 MVA saved through power factor correction and load management since inception.
  • Energy auditing and energy management strategies from the Energy Foundation.

Utilities

  • Local capacity-building programs from the Energy Foundation.
  • Management from the Energy Commission for efficiency in generation and distribution.
  • Total hydro capacity will be 1500 MW when current projects are completed.
  • Over 6000 solar systems (3.2MW capacity) installed (off-grid application).

Transport

  • Fuel substitution under the UNFCCC – LPG, CNG, electricity considered for public transport.

Residential

  • Efficient Lighting Initiative – 6 million incandescent bulbs have been replaced by CFLs, funded by the government, saving 200-240 MW in capacity.
  • Mandatory “Ghana Electrical Appliance labelling and Standards Programme” (GEALSP) for CFLs and room air conditioning.

Public

  • “Energy Efficiency in Public Buildings Project” , retrofitting buildings with EE equipment and electrical devices, including universities and ministries.
     
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Ownership

Electricity
Prior to 2008, the Volta River Authority (VRA) was the state utility responsible for electricity generation, transmission and distribution throughout Ghana. The VRA is wholly owned by the Government of Ghana and was established in 1961 under the Volta River Development Act. Through its subsidiary company, the Northern Electricity Department (NED), the VRA remains responsible for (and is the sole distributor of) electricity in the northern regions of Ghana (being the Brong-Ahafo, Northern, Upper East, Upper West, and parts of Ashanti and Volta Regions of Ghana). As a result of the unbundling process completed in 2008, another state utility, the Electricity Company of Ghana (ECG), was established for the purpose of purchasing electricity from the VRA at a bulk tariff and distributing power in the southern regions. ECG is a private limited company that is wholly owned by the Government of Ghana.

As part of power sector reforms implemented in 2005, the VRA’s mandate was restricted to electricity generation and the electricity transmission functions of VRA have been transferred to the Ghana Grid Company Limited (GridCo) (a process completed in 2008). GridCo is responsible for operation of the National Interconnected Transmission System (including dispatch), bulk power purchase of electricity from generators and sale to NED and ECG. It is also intended that the VRA’s distribution functions in the northern region of Ghana, currently vested in NED, will be transferred to the ECG, thereby creating a national distribution utility. Generators wishing to be connected to the transmission system must enter into an electrical connection agreement with GridCo.

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Competition

The power sector has been unbundled to create an environment conducive for private sector investment. Although the VRA has a monopoly over the generation of power in the country, independent power producers (IPP) are allowed to operate in the power system.

State owned companies solely undertake the generation and management of electricity in Ghana; Volta River Authority (VRA) is the company responsible for the generation of electricity and operates all power plants in Ghana. Electricity Company of Ghana (ECG) and the Northern Electricity Department (NED) (a subsidiary of VRA) are in charge of the distribution of electricity. Whereas, Ghana Grid Company (GRIDCO) is the body responsible for the transmission system of electricity.

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Energy framework

The Government of Ghana has a national energy policy aimed at providing affordable access to electricity to all communities by 2020 and becoming a net exporter of electricity by 2015. This can be achieved by increasing the capacity of electricity generation (from 2,000 to 5,000 MW by 2015) as well as updating the necessary transmission and distribution infrastructure within the power sub-sector.

The national renewable energy policy of Ghana is to increase the renewable energy components to 10% in the national energy mix by the year 2020. The renewable energy policy would be concentrate on three areas, namely solar and wind, alternative fuel for transportation and biomass pricing. The Government would institute measures to overcome the challenges in technology, market constraints and other institutional barriers inherent in investments in solar and wind. Further, the government would create a favorable regulatory and fiscal regimes as well as attractive pricing system to enhance investment in the sector.

The National Electrification Scheme (NES) has been a largely successful government program initiated with donor assistance in 1989 with a goal of extending the grid throughout the country by 2020. To date, all district capitals are on the national grid, as are many communities along the high and medium tension power lines.
With the stated goal of the NES, there is little room for decentralized energy sources such as solar home systems. In addition to the high cost of the systems, people in communities without grid power remain convinced that the grid will be extended to them soon and are not willing to pay substantially more for solar energy in the short term.
It should be noted that, the cost of extending the grid to low-voltage points is estimated at $2,000-$3,000 per connection, a range which is comparable to the cost of a mid-sized solar electric system. This is in addition to the cost of medium and low voltage transmission lines. Under these circumstances, the NES has shut out a large sector of the market for photovoltaic systems. The subsidies enjoyed by users under the NES are also not available to RET users, who are forced to bear the full cost of their power systems in advance.

The current environment heavily favours extension of the grid even to areas where it is not economically justified. The needs of such communities could be easily met with the same level of subsidy enjoyed by grid users if they were given the choice between solar, wind, micro-hydro and other sources. (Attachie and Amuzuvi, 2012)

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Energy debates

Ghana which now has an installed generating capacity of 2,845 MW from hydro, thermal and a little solar, seeks to increase this generating capacity to 5,000 MW using thermal and renewable energy and boosting, in particular, the use of solar energy.  International Solar Utilities, Sustainable Equities Group, and PN Solar intend to build 600 MW of solar power parks in the African country, six parks that are each 100 MW in size. Furthermore, they intend to open a solar panel factory with an annual output capacity of 300 me. The idea is that the factory will produce solar panels that could help neighbouring countries to also move forward with increasingly popular solar power.

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Energy studies

The Solar and Wind Energy Resource Assessment (SWERA,  http://en.openei.org/apps/SWERA) project has developed detailed maps of wind and solar resources in Ghana.

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Role of government

Ministry of Energy (MoE)
The Ministry of Energy is responsible for setting energy policy, including in the power sector.

Energy Commission
The Energy Commission Act established the Energy Commission (the “Commission”) with the main object of regulating and managing the utilisation of energy resources in Ghana and to co-ordinate all policies in relation to them. The Commission is responsible for granting licences to public utilities for the transmission, wholesale supply, distribution and sale of electricity and natural gas in Ghana.

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Government agencies

Environmental Protection Agency (EPA)
This is the main government authority on environmental issues. They ensure compliance with the established impact assessment procedures and regulations in developing projects. Environmental permit is required before power generation companies can begin operation in Ghana.

Ghana Energy Foundation
This authority is responsible for developing programs which seek to improve the energy management as well as efficient ways of energy usage. Services of the energy foundation are targeted towards the industrial, commercial as well as the non-residential energy consumers.

Ghana Investment Promotion centre (GIPC)
This is the governmental agency that tasked with the responsibility of promoting and facilitating investment in all sectors of the economy in Ghana with the exception of mining and petroleum. Therefore this agency provides all prospective investors credible information about investments in all sectors under its category. Hence investment in renewable energy in Ghana in this project falls under the domain of GIPC.

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Energy procedure

Any investor venturing into the RE industry must be registered under Ghanaian law either as a limited liability company under the Companies Act, 1963 (Act 179) or under the Incorporated Private Partnerships Act, 1962 (Act 152). In addition to the incorporation requirement, investors must take note of the Ghana Investment Promotion Centre Act, 1994 (478) (the “GIPC Act”) and the Ghana Free Zone Act, 1995 (Act 504) (the “Freezone Act”).

According to the Licensing Manual for Service Providers in the Renewable Energy Industry, published in September, 2012 (the “RE Manual”) and issued by the Commission, entities that engage in different commercial activities require different licenses for each activity.

All applications for licenses will receive notification of grant within 60 days unless refused. Refusals may only be based on grounds of inadequacy of technical data, issues of national security, public safety, food security, health and environmental safety. The wholesale electricity supply license is granted for 20 years and licenses once acquired are only transferable with the written approval of the Commission. For the purposes of acquiring the wholesale electricity supply license, the acquisition process is divided into three broad stages. These stages illustrate the kinds of information that will be required by the EC in order to grant approval for progression to subsequent stages. The stages are as follows: Stage 1. Acquisition of provisional license, Stage 2. Prior to construction, Stage 3. Acquisition of operating license.

It is important for RE developers to initiate their projects far in advance. Bureaucratic bottlenecks may hamper attempts to sail through the entire process; it is advisable for developers to involve the Ministry of Energy & Petroleum (MoEP) early on in the process to facilitate meetings with the various stakeholders in the energy sector. This method has been put to effective use in other projects in the energy sector.

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Energy regulator

The Public Utilities Regulatory Commission (PURC) was established by the Public Utilities and Regulatory Commission Act, 1997 (Act 538).

The Public Utility Regulatory Commission (PURC) and the Energy Commission are the bodies responsible for regulating the electricity supply industry. PURC is the body mandated by government to set electricity tariff; the tariffs are normally set in consultation with key stakeholders made up of the generators, distributors and the representatives of major consumers. The Energy Commission on the other hand is responsible for technical regulation and advising the Ministry of Energy on energy planning and policies.

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Degree of independence

PURC is a statutorily independent body, composed of 9 members. This includes a Chairman, one person each nominated by the trades union congress (TUC) and the Association of Ghana Industries; one representative of domestic consumers, and one Executive Secretary appointed by the President of Ghana in accordance with the advice of the commission in consultation with the Public Services Commission.  Section 5 of the Act stipulates that apart from the chief executive, members of the commission shall hold office for five years, and shall be eligible for re-appointment on expiration of that period. Section 4 of the Public Utilities Regulatory Commission Act 1997 states that the Commission shall not be subject to any authority in the performance of its duties. Financing for the commission comes from government subvention and operational levies.

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Regulatory framework

The Renewable Energy Act, 2011 (Act 832) aims to promote, develop, manage, utilise, sustain and ensure adequate supply of RE resources for power and heat and other related purposes. RE as defined by the Act includes wind, solar, hydro, biomass, biofuel, landfill gas, sewage gas, geothermal energy and ocean energy.  To give further impetus to the Act, the Energy Commission (EC) has published the License Manual for Service Providers in the Renewable Energy Industry to flesh out the bare provisions of the Act. The manual sets out extensive requirements for various segments of the sector, however this article focuses solely on power generation (particularly solar and wind).

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Regulatory roles

The Commission and the PURC are the regulatory bodies within the power sector regulating the activities of the relevant stakeholders. The Commission is the technical regulator of the industry and is the body responsible for assessing applications for licenses, either as generators, transmitters or distributors of electrical power. The PURC, on the other hand, among other things, sets tariffs and monitors compliance with performance standards of the service providers in the power supply chain.

The PURC is responsible for the regulation of utility services by public utilities to consumers. Under the PURC Act, the PURC, among other things, approves rates chargeable by public utilities, ensures competition among public utilities, monitors standards of performance of public utility service provision and ensures the protection of consumer rights.

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Energy regulation role

The Energy Commission (EC, http://new.energycom.gov.gh/)) is mandated under Act 541 of 1997 to plan, regulate, manage and develop energy supply and utilization in Ghana. The Commission is the technical regulator of the electricity and natural gas utilities. Specifically, the Commission is mandated to receive and assess applications, and grant licences to public utilities for the transmission, wholesale supply, distribution and sale of electricity and natural gas. In addition, the Commission is required to establish and enforce standards of performance for public utilities active in the sector, and promote and ensure uniform rules of practice for the operations of the sector.

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Regulatory barriers

  • Mini-Grid connected systems involve very high investment and transaction cost.
  • Institutional capacity limitations (R&D, demonstration & implementation)
  • There is difficulty in assessing affordable and appropriate financing schemes.
  • The high upfront cost of SHS and lanterns systems is a barrier to commercialising solar photovoltaic.
  • The problem is further compounded by the fact that a significant part of the price build-up for solar products is accounted for by challenges in the implementation of legislation on import taxes, duties and other charges on imported renewable energy equipment.
  • Limited involvement of women in the planning and implementation of energy interventions such as promotion and usage of renewable energy systems.
  • Lack of access to the technology, inadequate maintenance facilities, bad quality of product.
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References

World Bank (2013): Energizing Economic Growth in Ghana: Making the Petroleum and Power Sector Raise to the Challenge. Available at http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2013/07/22/000442464_20130722120043/Rendered/PDF/796560WP0P13140Box0377384B00PUBLIC0.pdf Accessed 17th February

Howanlowells.com (2013): The Power Market in Ghana. Available at http://www.hoganlovells.com/files/Publication/1502043f-6c0f-4cc3-81ef-65365d230b24/Presentation/PublicationAttachment/a071edc5-abc7-46bf-9a13-6ae1f369d559/The%20Power%20Market%20in%20Ghana.pdf Accessed 17th February

Power in Ghana. Available at http://www.gro-ventures.com/wp-content/uploads/2013/12/Energy-Original-Analysis-Ghana.pdf Accessed 17th February

King & Wood Mallesons LLP (2013):  Energised thinking: Ghana's renewable energy regime. Available at http://www.sjberwin.com/insights/2013/11/21/energised-thinking-ghanas-renewable-energy-regime Accessed 17th February

Norton Rose Fullbrigth: Investing in the African Electricity Sector – Ghana – 10 Things to Know.  Available at http://www.nortonrosefulbright.com/files/investing-in-power-in-ghana-100588.pdf  Accessed 17th February

EIA (2013): Ghana: Country Brief. Available at http://www.eia.gov/countries/country-data.cfm?fips=GH Accessed 17th February

Wentemi Apeaning, Raphael (2012): Energy Efficiency and Management in Industries – a case study of Ghana’s largest industrial area Available at  http://www.diva-portal.org/smash/get/diva2:527775/FULLTEXT01.pdf Accessed 17th February

Dramani, Iliyasu (2012: Providing renewable energy solutions in Ghana: Overview of the business environment regarding some selected renewable energy sources Available at  https://www.theseus.fi/bitstream/handle/10024/53534/Dramani%20Iliyasu%20BBA%20Thesis.pdf?sequence=1 Accessed 17th February

IRENA (2013): Renewable Readiness Assessment Available at  http://www.irena.org/DocumentDownloads/Publications/RRA_Design_to_Action.pdf Accessed 18th February

Renewable Energy Technologies in Ghana: Opportunities and Threats  Research Journal of Applied Sciences, Engineering and Technology 6(5): 776-782, 2013 Available at http://www.researchgate.net/publication/240249401_Renewable_Energy_Technologies_in_Ghana_Opportunities_and_Threats/file/5046351c4b20793d1f.pdf. Accessed 18th February

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