IMANI Alert: Fix this power mess!

IMANI Researcher, Patrick Stephenson, and Africa Economics LLC Co-Founder, Theo Acheampong, have published their overview of  the most pressing issues confronting Ghana’s energy for the first quarter of 2014.

The report presents the a comprehensive analysis of the Ghanaian energy market, and its regulatory deficits.

The following critical observations were made about the Ghanaian power sector by the Researchers:

1. Whilst various sector leaders at the political and technocratic levels like to tout installed generation capacity (how much energy the various power plants in the country have been configured to produce in ideal conditions) of nearly 2300 megawatts, and frequently like to promise production levels of up to 5000 megawatts in the medium-term, the brutal truth is that we really don’t have a handle on how much power we produce day to day, leading to rampant confusion among the power generators on the one hand, and the distributors on the other hand.

2. The GRIDCO system control unit was put up in early 2013 to create a national interconnection system linking all the various remote terminal units to one master control dashboard in Kpone. The truth is that despite millions of World Bank dollars spent, this center is still failing to do what we were told it would do: provision of real-time updates on the latest state of the transmission grid at any given time. That is why in recent episodes, whilst the VRA proclaims above reserve-level generation, the ECG continues to insist that enough power is not supplied to it to meet peak load demand.

3.GRIDCO continues to lack serious information technology capacity. In fact, until 2011, even internal email systems in this massive utility were obsolete, and though basic communication functions have been restored since then, the organisation continues to lag behind in state of the art thinking regarding grid design and monitoring. This seriously affects load forecasting and the careful spreading out of resources at the generation level to ramp up production during peak times.

4. Given that at the core of our acute problem is peak-load management (no doubt exacerbated by the chronic under-investment in the power sector due to distorted tariffs and a dysfunctional subsidy recovery regime), demand-side management (the patterns of power consumption separate from power production) can be more creative through for instance broad master agreements with industry and mining associations to experiment with off-peak operating hours. Done at scale, this can alleviate some of the demand pressures present during peak hours.

5. Off-grid solutions have to date focussed on micro-interventions in a half-hearted renewable energy experiment. Government may want rather focus on experimenting with tax breaks and additional incentives to encourage industrial and mining concerns to invest even more aggressively in peri-grid thermal units, By ‘peri-grid’, we mean the implementation of systems to enable such companies sell power they generate 1-digit megawatt plants during off-peak hours at adjusted tariff levels to support the primary grid.

6. The time has also come for us to acknowledge that the energy market in the country is no longer uniform. Consumers in Accra, Kumasi and the Takoradi urban zones now constitute a different breed of consumer, and may require their own distribution regimes, with separate pricing and a devolved infrastructure, with different investment programs and timelines. The higher income and more aggressive consumption growth in these zones have now so diverged from the rest of the economy that a certain decentralisation of the electricity market may eventually be in order. Of course, we acknowledge that much work would need to be done to get the utilities to the point where such clever systems can be managed effectively, but the time to start confronting these stark realities is now.

7. The publication to which this preamble is attached does a comprehensive job detailing the confusion in the current subsidy and price control regimes, so suffice it to say that the uncertainties created by the inability to allow the automatic adjustment formula to work in the price control regime seriously frustrate the ability of investors to plan and deploy capital in the electricity sector. Without serious capital to acquire the latest technology, talent, and maintenance systems, the resulting inefficiencies feed into the price profile of energy in Ghana leaving every one, buyer as well as seller, feeling ripped-off.

8. The only way therefore to assure Ghanaians of all income levels of adequate power supply at affordable prices is to boost investment that can drive efficiency gains, economies of scale, availability of cheaper feedstock (such as liquefied natural gas) and smarter grid design. That is the bottomline.


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