Power Generation in Perspectives

Hydropower had solely provided electricity for Ghanaians for many decades until late 1990s. Currently, hydro is still in the lead with the installed capacity of 1,580megawatts (MW) comprising 55.5% constituting Akosombo Dam (1,020MW),Kpone Hydropower(160MW) and Bui Hydropower(400MW).

There are also three potentials of smaller hydropower dams: Maham, Tarkwa-Breman and Nsuaem to be constructed on the Ankobra River in the Western Region. These constructions that are supposed to start in the last quarter of 2017 that will produce 42MW.

As the economy grows, urbanisation increases and population explodes as well as lifestyles changes, so has the demand of electricity over the years.

Government and key stakeholders saw the need to enhance supply to match up with this increasing demand. Thus, appropriate generation targets were proposed for various governments to consider. However, there was a lack of financial commitment needed for the corresponding supply. Solving this ever-increasing demand requires stimulation of massive investments in other sources of power. Diversifying the power sector has become one of the options adopted by the respective governments to bridge the short fall.

Aboadze thermal enclave, with a capacity of 550MW was established in the last quarter of 2000 as the first thermal project to supplement hydropower. Thereafter, Independent Power Producers (IPPs) were also brought on board to complement the effort. Currently, the total installed thermal capacity is about 1,248MW. Additional thermal power plants have been initiated by the Volta River Authority (VRA) and some IPPs in the twin-enclaves of Tema and Aboadze.

New plants of over 500MW comprising the 221MW Kpone Thermal Plant, the 110MW Tico expansion project, the 120MW Asogli Phase II and the 38MW Tema Thermal plant Expansion Project have reached various stages of completion. More than 1,800MW from five emergence power barges are expected to be added to the national grid soon. Others that are also in the pipeline are the Cenpower (350MW), Jacobsen Electro (360MW), and General Electric (300MW).

In furtherance of the country's diversification policy, Ghana's huge potential for solar power must be urgently tapped. Already, the government has established 2MW at the Navrongo Solar Park. After its success, the VRA has secured an amount of $ 22million from Germany to construct another solar power plant of 12MW capacity at Jirapa. This dovetails into the government's objective of generating 10% of power from renewable sources by 2020.

Shifting Power Generation

The ongoing narratives indicate that the generation landscape is changing in favour of thermal sources. Thermal plants by far will be a dominant generation source in Ghana very soon. The hydropower will henceforth assume a supplementary role. One of the factors that makes hydropower impossible to generate in full capacity in recent times is due to the country’s erratic rainfall pattern.

There is no doubt that hydropower plays a significant role in the socio-economic development of Ghana. It has illuminated every town, city, village, hamlet and institutions for many decades with minimal tariffs. Unfortunately, some Ghanaians have developed a sense of entitlement to it without recourse to payment of bills especially most state institutions.

As there is a new paradigm in the power generation, some variables in the sector will also witness some changes. Cost of production, adequacy of natural gas and tariffs regimes will be affected significantly. Currently, the cost of thermal generation is over 100% more than the cost of hydro. Thermal feeds that include natural gas, light crude oil and diesel are more expensive. However, the cheapest fuel among them is natural gas. Therefore, companies in the value chain should therefore be strategic and proactive towards procuring and ensuring that it becomes a main fuel source.

Projected Local Gas Supply

The challenge from this generation mix is how to secure regular gas supply to promote their operational efficiencies. This therefore implies that more gas sources would have to be secured from markets elsewhere. Natural gas from the Jubilee fields is projected to peak at 120 million standard cubic feet daily (mmscfd). However, it is currently producing only 45mmscfd to Aboadze after the recent repair works of the compressors. Furthermore, Ghana has signed a contract with Nigeria for a maximum natural gas supply of 123mmscfd, but it could supply only 49mmscfd. The supply from Nigeria, under the West African Pipeline, has been fluctuating and there is no end in sight of this debacle.

It is also expected that more gas will come on stream from the Sankofa project which has an estimated value of 1.15 trillion cubic feet over its production life with a potential of producing about 1,100MW of electricity. It will ramp up to 200mmscfd, while Tweneboah, Enyeara and Ntomme(TEN) fields are estimated to produce 80mmscfd. All these sources will sum up to a little above 500mmscfd. Granted that all these sources are adequately harnessed, the country's demand will still surpass its supply by 2020. This deficit must be bridged if we ever wanted to avert the reoccurrence of the electricity crisis in the foreseeable future.

Projected Natural Gas Demand

Considering a number of thermal plants and emergence power barges that are supposed to be operational between now and 2018, it is projected that the natural gas demand could rise above 850mmscfd by 2020. The non-power sector demand is estimated to reach about 180mmscfd by the same year. These projections stem from the increasing thermal generations, industrial and domestic consumptions. A huge supply deficit is likely to occur sooner than later if an alternative solution is not found to bridge the gap.

Due to the unreliability of gas supply, most thermal plants are now being retrofitted to use light crude oil in addition. Hence in the absence of the natural gas, they are operated on light crude oil which has significant cost implications. The only thermal plant that still operates on only natural gas is the Asogli plant, that normally shutdowns completely whenever there are shortages. The gap between gas demand and supply must be narrowed strategically going forward. The solution lays with the importation of Liquefied Natural Gas from markets available in other countries

Finding LNG Markets Elsewhere

To bridge this imminent gas deficit, stakeholders must find Liquefied Natural Gas (LNG) supply markets elsewhere to supplement the existing supply sources. LNG is liquefied natural gas, a clear, coluorless, non-toxic liquid which is cooled to 162ºC and a volume of the gas 600 times, making it easier to store, ship and transport to energy starved countries overseas. Stakeholders get portfolios of flexible LNG volumes from Angola, Qatar, Equatorial Guinea, Trinidad and Tobago, and Australia at competitive prices.

However, regasification facilities must be constructed in Ghana for the purpose of re-conversion. The fact remains that LNG is relatively cheaper than light crude oil for which the country should take advantage of.

This will ensure that there is a regular supply to match up with our ever increasing appetite for natural gas. This should be one of the central policies in the short to medium term that must be pursued with alacrity to avoid an uninterrupted gas supply. A concerted effort towards securing the LNG is the best way forward of ensuring that thermal generation is firmly secured in the country.

Imminent Electricity Tariff Increases

The increasing cost of production without appropriate tariff hikes to the consumers make companies lose substantial investments. According to VRA, somewhere in 2015 its fuel cost amounted to $ 1.3 billion but it only mobilised a total revenue of $900 million, depriving it from breaking even let alone making profit.

This situation becomes disincentive to the IPPs and other investors. It is for this clear inefficiency that the Millennium Challenge Compact is demanding for "private participation" at the Electricity Company of Ghana (ECG) to enhance its revenue mobilisation as a precondition for its monetary intervention in the sector.

It is hoped that the government and key stakeholders are aware of the dangers the generation shift could pose for energy security of Ghana. Cost of production will increase astronomically with thermal, which will be eventually led to higher electricity bills to consumers.

This development informs the recent proposal of 100% increases in the electricity tariffs made at a Public Utility Regulatory Commission's forum in Tamale. In monetary terms, ECG is proposing an increment from the current tariff of 16 pesewas to 35 pesewas for a unit, while VRA is demanding an increase from 15 pesewas to 30 pesewas per unit.  Even though it will be bitter pills for Ghanaians to swallow, it will be a panacea to ensuring regular supply of electricity.

As the president aptly put it in his address at the GJA Awards Night on 15th August, 2015, that "tightening" the electricity distribution value chain will make it responsive to the needs of consumers and attract more investments into the sector. When the electricity bills are effectively collected, it will attract more IPPs to partner the government to adequately address the power deficit.

These increases are imminent and unavoidable if the companies are to break even. Therefore the public must be prepared to pay realistic tariffs. Energy Policy and Research  Institute (EPRI) however is with the opinion that passing on a whopping 100% tariff increment to the end users at one go will be unbearable. Hence, we propose to the PURC to stagger the 100% over a six month period to lessen its burden on the already stressful economy.

Predictably, Ghanaians have started rejecting tariff hikes forgetting that this attitude has always led to a repetition of the power crisis. If the tariff remains very low, while cost of production skyrockets, it discourages investments because no company is in business to make losses. The increments may be described as a "necessary evil". Collective focus is therefore needed from all stakeholders if we really mean to overcome the generation deficit in the country.

Conclusion

EPRI believes our relief in exorbitant tariffs will depend on the deployment of renewable sources of energy as a long time measure.  No single source of power can guarantee us affordable, reliable and secured electricity. To trigger the most profound revolution in the power sector that will reduce our dependence on thermal and hydro sources and bring down the bills, the government policy direction should be geared towards generation of more renewable energy. The policymakers should also consider some incentives to off grid users to attain greater penetration into the market. Even though the initial capital expenditure (CAPEX) outlay is huge in the renewable sector, its operating expenditure (OPEX) is quite minimal.