Ghana Energy Situation

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Ghana

Capital:

Accra

Region:

Sub-Saharan Africa

Coordinates:

5.5500° N, 0.2000° W

Total Area (km²): It includes a country's total area, including areas under inland bodies of water and some coastal waterways.

238,530

Population: It is based on the de facto definition of population, which counts all residents regardless of legal status or citizenship--except for refugees not permanently settled in the country of asylum, who are generally considered part of the population of their country of origin.

34,121,985 (2023)

Rural Population (% of total population): It refers to people living in rural areas as defined by national statistical offices. It is calculated as the difference between total population and urban population.

41 (2023)

GDP (current US$): It is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources.

76,370,394,412 (2023)

GDP Per Capita (current US$): It is gross domestic product divided by midyear population

2,238.16 (2023)

Access to Electricity (% of population): It is the percentage of population with access to electricity.

85.10 (2022)

Energy Imports Net (% of energy use): It is estimated as energy use less production, both measured in oil equivalents. A negative value indicates that the country is a net exporter. Energy use refers to use of primary energy before transformation to other end-use fuels, which is equal to indigenous production plus imports and stock changes, minus exports and fuels supplied to ships and aircraft engaged in international transport.

-8.19 (2014)

Fossil Fuel Energy Consumption (% of total): It comprises coal, oil, petroleum, and natural gas products.

52.54 (2014)

Source: World Bank

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Introduction

Electricity in Ghana is a key determinant of the country’s continued economic growth, but supply has recently struggled to keep up with demand. Sustained demand growth of over 6 percent per year has strained the already overburdened electricity system. A major power crisis in 2006–7 is estimated to have reduced GDP growth by one percent.[1]

The Government of Ghana, with the help of international donors, has sought to strengthen the electricity sector in response to this challenge. The Government has outlined two key objectives for solving existing problems in the sector and allowing it to power sustainable, inclusive economic growth in the future: (i) double installed generation capacity by 2015; and (ii) extend universal access to electricity by 2020.[2]

The sections below provide an overview of the following:

• State of the electricity sector (2)
  
• Institutions that govern the electricity sector (3)
• Major policies, laws, and regulations that affect the electricity sector (4).

The last section summarizes the efforts of donor agencies to improve outcomes in the electricity sector.

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[1] “Energizing Economic Growth: Making the Power and Petroleum Sectors Rise to the Challenge.” World Bank, June 2013 P.1

[2] “National Energy Policy.” Ghanaian Ministry of Energy. February 2010

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Electricity Situation

The Ghanaian electricity sector is in a period of transition. The Government is attempting to attract more private sector participation in the sector. Independent Power Producers (IPPs) have begun to enter the electricity generation market, previously dominated by the public sector. The state still owns both electricity distribution companies, as well as the electricity transmission company. Key problems in the sector included demand outstripping supply, poor state of transmission and distribution, and tariffs that have not covered costs.

In 2016-17, severe electricity rationing, so-called "dumsor", were necessary. The government over-reacted, and let several generation licences to IPPs with a long-term commitment to high prices (43 power purchasing agreements!). Most of the power purchased based on these agreements were take-or-pay based contracts, Ghana has to pay even for power not consumed. This led to an over-supply, and an inability to charge the market for the cost of generation. Within five years, Ghana turned from a country struggling with producing enough power to meet demand, to a country struggling with excess power production at a high price: Producing almost double the needed demand, Ghana pays annually over 500 million USD for power not even used. Lessons learnt include: flexible contracts, currency risks protection, corruption, transparency, political expediency. (for more information, please refer to this article: "Lessons to be learnt from Ghana’s excess electricity shambles", August 5, 2019...).

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Installed Generation Capacity

Ghana’s electricity generation has traditionally been dominated by hydro assets; however, in recent years hydro has been complemented by fossil fuel generation to meet rapidly growing demand. Total installed capacity to date is about 2,703.5MW. 50 percent of installed capacity comes from hydropower installations, with the rest coming from thermal plants burning Natural Gas (NG), Light Crude Oil (LCO), or diesel. The generating units are owned and operated primarily by the Volta River Authority (VRA); however, some IPPs have begun to enter the market.

The table below shows the mix of thermal generation assets and hydro generation assets in GHana. Each thermal generation unit can use NG, which is less expensive than LCO or diesel. However, due to an ongoing interruption in the West African Gas Pipeline (WAGP), all thermal units are currently operating using diesel or LCO (as listed in column ‘Fuel 2’) except for Sunon Asogli. Sunon Asogli can only run on NG.

Table 1: Installed Capacity in Ghana

Name	Owner	Phase Out (Year)	Installed Capacity (MW)	Reliable Capacity (MW)	Fuel 1	Fuel 2
Akosombo	VRA	2065	1020	900	Hydro
Kpong	VRA	2042	160	140	Hydro
BUI	BPA	2065	260	120	Hydro
Aboadze T1	VRA	2011	330	300	NG	LCO
Aboadze T2 (TICo)	IPP	2013	220	220	NG	LCO
Tema TT1PP	VRA	2014	126	110	NG	LCO
TEMA TT2PP	IPP	2035	49.5	45	NG	Diesel
OSONOR (CENIT)	IPP	2037	126	120	NG	LCO
Tokaradi 3	VRA	2038	132	120	NG	LCO
Tema Mine Reserve Plant	IPP	2032	80	40	NG	Diesel
Sunon Asogli	IPP	2035	200	180	NG

VRA = Volta River Authority; BPA = Bui River Authority; IPP = Independent Power Producer

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The Volta River Authorithy

The VRA, established in 1961 by the Volta River Development Act (Act 46), is the state-owned electricity utility responsible for generating electricity in Ghana and supplying electricity in bulk to Ghana Grid Company Limited (GridCo). VRA owns and operates the Akosombo hydro power station, the Kpong hydro power station, the Aboadze T1 plant, the Tema TT1PP plant, and the Takoradi Thermal Power Plant (T3) located at Aboadze. VRA is also a minority joint partner with TAQA, which owns and operates the Takoradi International Power Company (TICO) thermal power plant also located at Aboadze. In addition to the plants that VRA owns, VRA also operates the Tema TT2PP plant and Mine Reserves plant for their respective owners.[1]

In recent years, VRA’s role in the Ghanaian power sector has evolved significantly from generation, transmission, and distribution to focus on generation. In 2006, VRA ceded its transmission responsibilities to GridCo. In May 2012, VRA restructured its distribution department, Northern Electricity Distribution (NED), into a semi-independent, wholly owned subsidiary company of VRA, known as Northern Electricity Distribution Company of Ghana (NEDCo). Finally, VRA’s responsibility for all hydro resources within the Volta Basin—which includes the White Volta, Black Volta, and Red Volta rivers—was curtailed by the Bui Power Authority (BPA). BPA, a state-owned enterprise, was created to develop a hydroelectric plant at Bui, which lies within on the Black Volta.[2]

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[1] Tractabel Engineering. “Generation Master Plan Study for Ghana.” GridCo., November 2011

[2] “Energizing Economic Growth: Making the Power and Petroleum Sectors Rise to the Challenge.” World Bank, June 2013

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Independent Power Producers

Three IPPs have developed conventional generation units in Ghana, and more are planning to do so—including for renewable energy. The three IPPs operating in Ghana are:

• Takoradi International Company (TICo)—owned by the Abu Dhabi National Energy Company (TAQA)
• Sunon Asogli Power Plant—owned by the Shenzhen Group of China
• CENIT—owned by CENIT Energy Limited, a special purpose vehicle created to develop the IPP.

In addition, a Government Consent and Support Agreement for a fourth IPP, Cenpower, received Parliamentary approval in October 2012.[1]

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[1] Kunateh, M. “Gov’t Cenpower Sign Agreement.” The Chronicle, November 27, 2012 Accessed on January 13, 2014 at: http://thechronicle.com.gh/govt-cenpower-sign-agreement/

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Transmission and Distribution Network

The transmissions and distribution network in Ghana is operated by three state-owned enterprises. There are one transmission company, GridCo, and two distribution companies. The two distribution companies are divided by geographic region. Electricity Company of Ghana (ECG) covers southern Ghana and NEDCo covers Northern Ghana.

Ghana Grid Company Limited

Ghana Grid Company Limited (GridCo) is an independent transmission system operator formed in accordance with the Energy Commission Act, 1997 (Act 541)[1] and the Volta River Development Act, 2005 (Act 692). GridCo was formed in December 2006, and took over VRA’s transmission functions and assets in 2008.

GridCo is responsible for the operation and maintenance (O&M) of all transmission lines throughout Ghana. To carry out this responsibility Grid Co is also in charge of:

• Undertaking economic dispatch and transmission of electricity from wholesale suppliers (generating companies) to bulk customers and distribution companies
• Providing fair and non-discriminatory transmission services to all power market participants
• Providing metering and billing services to bulk customers
• Carrying out transmission system planning, investing to provide the capacity to reliably transmit electric energy, and managing the wholesale power market.

GridCo funds all of its operations through a transmission service charge levied on electricity delivered to distribution companies and through electricity sold directly to bulk customers. GridCo has successfully turned a profit the last three years.[2]

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[1] “National Energy Policy.” Ghanaian Ministry of Energy. February 2010

[2] “Energizing Economic Growth: Making the Power and Petroleum Sectors Rise to the Challenge.” World Bank, June 2013

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Electricity Company of Ghana

The Electricity Company of Ghana (ECG) is a limited liability company wholly owned by the Government of Ghana and operating under the Ministry of Energy. Known as the Electricity Department when it was founded in 1947, it was converted into the Electricity Corporation of Ghana by Decree 125 in 1967 and incorporated under the Companies Code in February 1997.[1]

ECG is responsible for distributing electricity in the southern part of Ghana. This includes the Ashanti, Central, Eastern, Greater Accra, Volta, and Western regions. Within those regions, ECG has 1.8 million customers and distributes 90 percent of all electricity sold in Ghana. In 2013, ECG’s customer base consisted of:

• Lifeline consumers that consume less than 50kWh per month—they represent 51 percent of ECG’s customers, 6 percent of consumption, and 1 percent of sales revenue
• Non-residential consumers—these customers represent 12 percent of energy consumption and 56 percent of sales revenue
• Non-lifeline residential consumer—these consumers represent 34 percent of energy consumption and 36 percent of sales revenue
• Special Load Tariff and high-voltage mines—these customers represent 48 percent of consumption and seven percent of sales revenue.

ECG has registered losses of US$16 million in 2011, US$44 million in 2012 and US$60 million in 2013.[2]

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[1] “About US.” ECG Accessed on January 10, 2014 at: http://www.ecgonline.info/index.php/organisation/about-us

[2] “Energizing Economic Growth: Making the Power and Petroleum Sectors Rise to the Challenge.” World Bank, June 2013

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Northern Electricity Distribution Company of Ghana

NEDCo is a wholly owned subsidiary of VRA responsible for the distribution of electricity in the northern part of Ghana. NEDCo serves the Northern, Upper West, Upper East, Brong-Ahafo, Sunyani, and Techiman regions. In those regions, which have an average electrification rate of 36 percent, NEDCo has 420,000 customers. These regions represent about 64 percent of the landmass of Ghana, but only 10 percent of power demand, with a peak load of 120MW.[1]

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[1] “About Us.” NEDCo Accessed on January 10, 2014 at: http://www.nedco.com.gh/about_us.php

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Demand vs Supply of Electricity

Over the last two decades the demand for electricity has been growing by 10-15 percent annually. The expanding commercial and industrial sectors are, together with the high population growth, the main drivers of electricity demand. Current demand forecasts project that electricity demand will continue to grow at least seven percent per year.

On the supply side, the power sector has consistently fallen short of capacity targets. In 2008, the Ghanaian Minister of Energy set a target of 3500MW of installed capacity by 2013.[1] At the end of 2013, the Ghanaian grid had 2,703.5MW of installed capacity, 200MW of which is idled due to a shortage of natui, and only 2295MW of dependable power. Assuming a reasonable reserve margin of 20 percent, Ghana would have required 2500MW of installed capacity in 2013.[2] Absent significant investments, the shortfalls will continue and become more severe.

[1]Speech by the Minister of Energy in 2008

[2] “Energizing Economic Growth: Making the Power and Petroleum Sectors Rise to the Challenge.” World Bank, June 2013

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Key Challenge in the Electricity Sector

Poor Transmission and Distribution Systems

Much of the country’s high voltage transmission system is ageing badly, and is increasingly unreliable. The majority of Ghana’s transmission system was built in the decades ago. The transmission system has not been significantly upgraded since construction. As a result, in recent years the transmission infrastructure has caused several total system collapses.

[1] The risk of outages remains significant as electricity demand continues to rise.

[1] Tractabel Engineering. “Transmission System Master Plan for Ghana.” GridCo., February 2011

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Poor Investment Return of Transmission and Distribution Company

The electricity distribution sub-sector suffers from poor commercial and operational performance. Ghana’s two distribution companies do not recover their cost of distributing electricity through established electricity tariffs. In addition, high losses due to old and overloaded networks in many areas; and problems with metering, billing, electricity theft, and inadequate revenue collection generate additional losses for the distribution companies. This leads the distribution companies to fall behind on payments to the transmission grid and power generators.[1]

[1] “Energizing Economic Growth: Making the Power and Petroleum Sectors Rise to the Challenge.” World Bank, June 2013

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Key Challenges in the Energy Sector

The electricity infrastructure in Ghana is not developed to its potential because of pressure on both the supply and demand sides. One study concluded that between 2013 and 2023 the Ghanaian power sector requires US$4 billion in investment to upgrade the transmission, distribution, and generation assets of the system.[1] The electricity sector faces several key challenges:

• Demand in outstripping electricity supply—this results in frequent load shedding and blackouts when demand exceeds available supply
• The transmission system is in poor condition—outdated transmission equipment can become overloaded during periods of high demand
• The distribution companies do not recover costs through tariffs—as a result the distribution companies are not able to pay transmission and generation companies, limiting funds available for investment.

At present, the Ghanaian power sector cannot meet demand for electricity. An interruption in the West African Gas Pipeline (WAGP) has contributed to this problem. Poor rainfall in past years has also limited the capacity of Ghana’s large hydro generation units leading to blackouts.

Furthermore, the interruption in the WAGP has led to replacing natural gas with expensive light crude oil (LCO) in plants that can burn either NG or LCO. This has increased costs around US$27 million per month. This additional cost is not recovered through tariffs, increasing the distribution companies’ losses. In turn, this limits the funds available for investments in new generation and transmission system upgrades.[2]

Furthermore, Power Africa highlights the following five bottlenecks as the biggest issues facing Ghana's energy sector:

• Poor financial health of the energy sector, and legacy debt 
  
• Limited creditworthiness of utilities
  
• Excess generation capacity in the short-term, over-contracting of new plants, and a high cost of generation
  
• Lack of transparent procurement framework
  
• Lack of strong, transparent regulatory precedents to drive competition
  

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[1] “Investment Opportunities in the Power Sector.” Ghana Ministry of Energy, January 2012

[2] “Energizing Economic Growth: Making the Power and Petroleum Sectors Rise to the Challenge.” World Bank, June 2013

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Institutional Set up

The electricity sector is overseen by three interrelated institutions. The Ministry of Energy and Petroleum (the Ministry) and the Energy Commission (EC) are government agencies. The Public Utilities Regulatory Commission (PURC) is a government funded independent regulator.

Ministry of Energy and Petroleum

The Ministry is responsible for the overall development and utilization of energy resources in Ghana. In the power sector the Ministry is charged with:

• Formulating, implementing, and monitoring power sector policies
• Providing power related technical and policy advice to the Government
• Supervising state-owned public electric utilities—VRA, GRIDCo, ECG, and BPA
• Managing power related programs, including the National Electrification Scheme
• Liaising with other agencies such as the EC and the PURC on power related matters.

In addition, in 2010 the Ministry established a directorate to focus exclusively on developing and promoting renewable energy generation in Ghana.

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Energy Commission

The EC was established in 1997 by the Energy Commission Act (Act 541) to provide technical advice to the Ministry on regulating, managing, developing, and utilizing energy resources in Ghana. The EC’s regulatory mandates are:

• Serving as the Government’s energy policy adviser by making national energy policy recommendations to the MoE
• Formulating national policies for developing and utilizing indigenous energy resources, in particular solar, wind, and biomass
• Preparing, reviewing, and updating indicative national plans to ensure that all reasonable demands for energy are met
• Prescribing legislative instruments, standards of performance, and technical and operational rules of practice for supplying, distributing, and selling electricity and NG
• Enforcing legislative instruments uniformly throughout the country
• Promoting competition in the supply, marketing, and sale of renewable energy products and other forms of energy
• Promoting energy efficiency and productive uses of electricity, NG, and petroleum products
• Licensing public utilities for transmission, wholesale supply, distribution, and sale of electricity and NG

The desired result of the efforts of the EC is to prepare the power sector for greater private sector participation.[1]

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[1] “Energy Commission Act (Act 541).” Ghanaian Parliament. 1997

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Public Utilities Regulatory Commission

The PURC is a fully independent body established under the Public Utilities Regulation Act (Act 538) responsible for regulating electricity and gas tariffs and enforcing customer service obligations of all public utilities. The PURC’s regulatory responsibilities for public utilities are to:

• Provide guidelines on rates chargeable for utility services
• Examine and approve tariffs charged by public utilities
• Protect the interests of consumers and providers of public utility services
• Monitor the standard of performance of these utilities
• Receive and investigate complaints and settle disputes between consumers and public utility
• Promote fair competition among service providers in electricity, as well as in water.

Under the Energy Commission Act 1997 (Act 541), PURC is also required to approve charges for the supply, transmission, and distribution of electricity and NG; as well as the bulk storage and transportation of petroleum products.[1]

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[1] “Public Utilities Regulatory Commission Act (Act 538).” Ghanaian Parliament. 1997

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Energy Foundation

The Energy Foundation Ghana is a non-profit, public-private partnership institution. It is devoted to promoting energy efficiency and renewable energy as a key strategy to managing Ghana’s growing energy needs in a sustainable manner. It was established in November 1997 by the Private Enterprise Foundation in collaboration with the Government of Ghana to promote sustainable development and efficient consumption of energy in all of its forms in Ghana.

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Policy, Legal, and Regulatory Framework

Ghana’s power sector is governed by a well-developed framework of laws, policies, and regulations, which the Government is continuing to develop. In particular, the EC is developing a distribution code as well as several regulations related to integrating renewable energy into the grid.

Energy Policy

Energy policy provides the general setting for the Government’s approach to the sector. National policy is issued by the Ministry, with advice and counsel from the EC. Regional policy documents are also relevant to Ghana’s power sector.

National Energy Policy (2010)

The National Energy Policy (Policy) outlines the Government’s policy direction for the energy sector. In the power sector the Policy:

• Provides an overview of existing objectives and priorities, problems, and measures to address the problems
• Calls for encouraging renewable energy in the national energy mix through pricing and fiscal incentives
• Recommends using waste to energy to generate low-cost electricity, as well as sustainable waste management
• Outlines Government’s attempt to encourage energy efficiency, including fiscal incentives, awareness creation, institutional and human resource capacity development, and financial intermediation
• Mainstreams gender concerns in the energy sector with a particular focus on improving cookstoves.

The Government intends for the Policy to guide its efforts in achieving its objectives to:

• Secure long term fuel supplies
• Reduce technical and commercial losses
• Achieve universal access to modern energy by 2020
• Improve the overall management, regulatory environment, and operation of the energy sector
• Ensure cost recovery tariffs for energy supply and delivery
• Encourage private sector participation in the sector through a wholesale electricity market
• Diversify the national energy mix by promoting renewable energy sources nuclear and coal.

Collectively, the Policy aims to achieve its vision of Ghana becoming a net electricity exporter by 2015.[1]

[1] “National Energy Policy.” Ghanaian Ministry of Energy. February 2010

Electrification Programs In line with the National Energy Policy’s objective of achieving universal access by 2020 the Government of Ghana is operating two electrification programs: National Electrification Scheme (NES)—the Government’s principal initiative to extend the reach of reliable electricity supply to all parts of the country over a 30-year period from 1990 to 2020. The NES manages funds raised through the National Electrification levy to fund electrification projects Self-Help Electrification Project (SHEP)—complementary electrification programs to support the NES. Under the SHEP, communities that are within 20 km from an existing 33kV or 11kV sub-transmission line can qualify for electrification if they procure all the power poles and have a minimum of 30 percent of the houses within the community wired. Once these conditions are met, the Government provides the conductors, pole-top arrangements, transformers and other installation requirements needed to provide supply to the community. The Government also welcomes private sector initiatives to connect to the grid provided that they can finance it.[1] [1] “Ghana Country Action Plan for Sustainable Energy for All.” United Nations. June, 2012 In 2018, the government will also distribute 12 million LED lamps throughout the country under a cost-recovery credit programme. This switch is expected to reduce the energy consumption by 50% from the current compact fluorescent bulbs’ usage. This move could help the government to sustain the national grid as also reduce energy cost for the Ghanaian consumers.

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Energy Sector Strategy and Development Plan (2010)

The Energy Sector Strategy and Development Plan (Plan) covers the Government’s strategies, program, and projects for developing:

• Energy Sector Institutions
• Power Sub-sector
• Petroleum Sub-sector
• Renewable Energy Sub-sector
• Waste-to-Energy
• Energy and Gender.

A key objective stated in this document is to have renewable energy (not including hydro above 100MW) represent ten percent of installed capacity by 2020.

The document also contains funding sources and verifiable indicators to facilitate effective monitoring and evaluation of the programs and projects.[1]

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[1] “Energy Sector Strategy and Development Plan.” Ministry of Energy. February, 2010

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ECOWAS Renewable Energy Policy

The renewable energy policy of the Economic Community of Western African States (ECOWAS) is a regional document that calls for achieving renewable energy targets of 19 percent of installed capacity and 12 percent of generation by 2030 excluding large hydro. The Policy includes an implementation plan for achieving the targets based on six steps:

• Securing a regional legal, institutional, and regulatory framework to develop consistency between the regional and the national renewable energy policies
• Ensuring each Member state has a National Renewable Energy Policy (NREP) with an associated implementation strategy and a five year rolling action plan
  
• Incentivizing the private sector to participate in renewable energy power and hardware production
• Training national officials and required technicians to design, implement, and operate renewable energy technology
• Calculating the viability gap for renewable energy technologies and identifying funding to close the viability gap
• Advocacy, awareness, and knowledge management through the Regional Observatory of the ECOWAS Center for Renewable Energy and Energy Efficiency (ECREEE).

The policy’s timeline calls for all member states to have completed their NREP in 2013, with the intention of implementing their five year rolling action plan starting in 2014.[1]

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[1] “The ECOWAS Renewable Energy Policy” ECOWAS Centre for Renewable Energy and Energy Efficiency. September, 2012

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Sustainable Energy for All Policy

The Sustainable Energy for All (SE4All) program works globally to extend energy’s reach in order to combat endemic poverty. In Ghana, the program is focused on improving access to modern fuels for cooking and productive uses of energy. SE4All intends to improve access to modern fuels through investments in LPG infrastructure and subsidizing distribution of LPG cylinders; as well as introducing improved biomass cookstoves, marketing improved biomass cookstoves, and investing in small and medium sized enterprises that will manufacture improved cookstoves. SE4All will improve productive uses of energy through training on efficient energy use in agro-processing, fisheries, and salt production.[1]

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[1] “Ghana Country Action Plan for Sustainable Energy for All.” United Nations. June, 2012

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Law

Law provides the basis for Government intervention in the energy sector. Energy law must come directly from Parliament. The Ghanaian parliament has created the legal framework of the power sector by passing laws that specify the role that each institution will play in the sector. Additionally, it has passed the Renewable Energy Act to cover all elements of the RE component of the power sector.

Electricity Sector Legal Framework

Ghana does not have a single source of law for its power sector, such as an electricity law. Instead, the existing legal framework for the power sector has gradually developed over time as the government established the institutions and state-owned electricity companies described in Sections 2 and 3.

Shortly after the Volta River Development Act established VRA, the Electricity Corporation Decree (NLCD 125, 1967) repealed the existing Electricity Act and established ECG.[1] The Electricity Corporation Decree made ECG responsible for all electricity distribution in Ghana, complementing VRA’s role generating and transmitting all electricity in the country. As discussed above, the Government created GridCo, BPA, and NEDCo to complement VRA and ECG in subsequent years. In addition, the Energy Commission Act created the legal framework for allowing IPPs to participate in the power sector and establishing performance standards for all entities operating in the power sector. Finally, the PURC Act established the legal jurisdiction of the electricity sector regulator.

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[1] “Electricity Company of Ghana,” Institute of Developong Economies Japan External Trade Organization. Accessed January 15, 2014 at: http://www.ide.go.jp/English/Data/Africa_file/Company/ghana02.html

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Renewable Energy Act (2011)

The Renewable Energy Act aims to support the use of renewable energy technologies to:

• Increase generation of electricity
• Diversify supply of electricity
• Generate electricity in an environmentally sustainable manner.

To achieve these three objectives, the Act assigns responsibility for renewable energy to the Ministry, the EC and the PURC. The Act also includes specific measures to increase the use of renewable energy in Ghana. These measures include:

• Licensing procedures for commercial activities in the renewable energy industry
• A feed-in tariff scheme for renewable energy
• A renewable energy purchase obligation
• A fund to provide financial resources for the promotion, development, and utilization of renewable energy resources
• Biofuel and wood fuel regulations.

A key objective of these measures is to create a more attractive environment for private sector investment in renewable energy in Ghana.[1]

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[1] “Renewable Energy Act (Act 832).” Ghanaian Parliament. 2011

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Regulation

Regulation provides specific of policy and law implementation. Regulation is developed primarily by the PURC and the EC.

National Electricity Grid Code (2009)

The National Electricity Grid Code (Grid Code) of Ghana establishes the requirements, procedures, practices, and standards for developing, operating, maintaining and using the National Interconnected Transmission System (NITS). The Grid Code also describes the responsibilities and obligations of each entity involved in the supply, transmission and delivery of bulk electric power over the NITS. The purpose of the Grid Code is to ensure that the NITS provides fair, transparent, non-discriminatory, safe, reliable, secure and cost efficient delivery of electrical energy.[1]

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[1] “National Electricity Grid Code.” Energy Commission. October, 2009

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National Electricity Distribution Code (Draft)

Similar to the Grid Code, the EC is developing National Electricity Distribution Code (Distribution Code) that will set out the conditions that a distribution utility must meet to distribute electricity under its license. The Distribution Code covers benchmarks and indices for power supply reliability and quality, connection agreements, safety standards, metering services, dispute resolution, and penalties for non-compliance. The Distribution Code will build on the Electricity Supply and Distribution Regulations (2008) that established standards of service for all distribution utilities.[1]

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[1] “Draft National Electricity Distribution Code.” Energy Commission. November, 2013

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Electricity Rate Setting Guidelines (1999)

The PURC has published the Electricity Rate Setting Guidelines (the Guidelines) to clarify its process for setting electricity tariffs in Ghana. The Guidelines explain tariff setting methodology for:

• Generation—distribution utilities competitively bid for long-term power sale and purchase contracts which are then approved by the PURC. The full cost of these contracts can be passed on to ratepayers. Excess electricity demand can be met in the spot market; however, the distribution company can only pass on a PURC approved spot market price
• Transmission—the PURC will set a transmission service charge (TSC) for electricity transmission services based on standard capital costs, standard O&M cots, and standard ancillary services costs
• Distribution—the PURC will set a distribution service charge for electricity distributions services based on standard losses of power and energy, standard capital costs, standard O&M cots, and fixed user costs.

Transmission and distribution charges are both subject to annual adjustment based on changes in inflation, productivity, and cost of capital.[1]

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[1] “Electricity Rate Setting Guidelines.” PURC. December, 1999

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Donors and Donor Activities

Oil and Gas

In the oil and gas sector, a number of donors are providing both finanacial as well as technical support to the Government of Ghana through her implementing agencies. These include UK/DFID (Ghana Accountability and Responsiveness Initiative), Germany/GIZ (Good Financial Governance Programme), Norway (Oil for Development - resource and environmental management, local content), the World Bank (Oil and Gas Capacity Building Project), China Development Bank (Western Corridor Gas Infrastructure Project), USAID (TA for gas regulation), MCC (TA for gas policy).

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Electricity

In the power sector a large number of donors have ongoing or pipeline projects.

Between 2007-2013 the largest energy sector project was the Ghana Energy Access and Development Project (GEDAP) which consolidates funding from multilateral and bilateral donors and Government. It comprises four principal components, including energy sector and institutional development, electricity distribution system improvement, transmission system upgrade, and electricity access expansion and renewable energy development. The main development partners funding GEDAP are the World Bank's International Development Association (IDA) and Africa Catalytic Growth Fund (ACGF), the Global Environment Facility (GEF), the African Development Bank (AfDB), the World Bank-administered Global Partnership on Output-based Aid (GPOBA), and the Swiss Agency for Economic Affairs (SECO). GEDAP is currently in the development of its third phase which is going to include productive uses of electricity.

The National Electrification Scheme (NES) is also supported by the Japan International Cooperation Agency (JICA), Danish International Development Agency (DANIDA), The World Bank, the Dutch Development Related Export Transactions programme (ORET), the Swedish International Development Cooperation Agency (SIDA) through grants and soft-loans. The Self-Help Electrification Programme (SHEP) receives financial support from the Export-Import Bank of India, the Export-Import Bank of the United States, the Export-Import Bank of China, SIDA and the South African Government through soft-loans.

The Millennium Challenge Corporation (MCC) of the USA is preparing the Compact 2 for Ghana which will - once agreed - become the largest energy sector project with a focus on energy sector governance and policy reform, a generation project (power park sites, IPPs and PPAs), a distribution project (ECG and NEDCo reforms, private sector participation), and an access project (peri-urban areas, economic enclaves, productive use of energy).

AfDB provides loans for the Ghana-Togo-Benin Power Interconnector as part of the West African Power Pool (WAPP), as well as for the Kumasi Power Reinforcement Project. In the pipeline are an IPP project in Tema (340MW combined-cycle gas turbine) and the expansion of an existing 220MW simple cycle power plant to combined cycle.

Agence Française de Développement (AFD) supports VRA in the retrofit of the Kpong hydropower dam and studies hydropower sites along White Volta and Oti rivers as well as support to GRIDCO.

SECO provides support to PURC and ECG/NEDCo in terms of capacity building.

The China ExIm Bank and the China Commercial Bank provide loans for grid extension to 400 communities in the Upper West Region and 500 communities in the Northern Region.

JICA supports with grants the improvement of the distribution system (new sub-transmission lines), solar PV systems (a 720kVA system at the Noguchi Memorial Institute for Medical Research, University of Ghana, Legon) and training of electric engineers.

Germany via KfW supports with a loan the development of a 12MW Solar PV Project with VRA at three sites in the Upper West Region. The first solar PV plant of 2.5MW has been commissioned in 2013.

Germany via GIZ supports the successful implementation of the Renewable Energy Act of 2011 through advisory services on grid-connected renewable energy, in particular regarding the procurement strategy for utility-scale solar and wind capacity, the renewable energy Purchase Obligation for electricity bulk customers and utilities, the renewable energy licencing regime, a Grid Integration Study and Transmission Reinforcement Study for variable renewables, the renewable energy Grid Code and regarding the Net-Metering Code.

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Biomass

The Global Alliance for Clean Cookstoves (GACC) supports the establishment of a testing facility for cookstoves at the Council for Scientific and Industrial Research (CSIR), Ghana. This includes mobile testing of cookstoves for productive use. The Energy Commission of Ghana with funding from UNDP supports the establishment of another testing facility at the Technology Consultancy Centre of Kwame Nkrumah University of Science and Technology (KNUST) in Kumasi.

Food processing in small-scale enterprises is promoted by the Directorate-General for International Cooperation (DGIS) of the Dutch Government which commissioned the “Energy Poverty and Gender in Agro Processing” project focussing on improved cookstoves for shea butter, pito and parboiled rice production and the establishment of woodlots for these industries (2014-2015). Furthermore in the “Developing Sustainable Energy Value Chains in Fish Smoking Markets in Ghana” project which promotes improved Cookstoves for fish smoking and the sustainable management of mangrove forests (2014-2015). Both programmes are being implemented by SNV.

In general, agricultural industries show the great potential in biogas in Ghana due to significant feedstock available for biogas generation, agro-industrial residues and animal and agricultural residues. However, so far only few biogas installations are implemented compared to the given potentials, so that most of the biomass remains unused. See also "Business Opportunities in the Ghanaian Biogas Sector".

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Donor Coordination

The coordination of donor support takes place within the framework of the Donor Sector Group, established under the Multi Donor Budget Support (MDBS) framework. The Energy Sector Working Group meets every other month to coordinate activities within the sector. Donors that are active in the sector group include: Switzerland (Sector Lead in 2013/2014), the World Bank, France (AFD), USA (MCC, USAID), African Development Bank, Japan (JICA), Germany (incl. KfW and GIZ) and KOICA. To a large extent there is division of labour.

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Further Information

• Ghana - Information Sources
• USAID Power Africa: Ghana Factsheet
• Lessons to be learnt from Ghana’s excess electricity shambles (2019)
• Project Appraisal Document on a Proposed Credit in the Amount of SDR 14.2 Million (US$20.0 Million Equivalent) to the Republic of Ghana for the Ghana Energy Sector Transformation Initiative Project (2018)
• Independent Power Projects in Sub-Saharan Africa: Lessons from Five Key Countries (2016)

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References