Addressing challenges in Ghana’s power sector: Expert perspectives from ‘The Dialogue’

The power sector in Ghana has been plagued by persistent challenges, including electricity crises that have had significant ramifications on the nation's economy and livelihoods. In recognition of the urgency to address these issues, THE DIALOGUE, a platform created by the Graduate Students Association (GRASAG) National Secretariat is dedicated to fostering constructive discussions on critical national issues. Its maiden edition was under the theme "Electricity Crises: Outlook and Way Forward."

The inaugural event brought together leading experts and thought leaders to examine the root causes of Ghana's electricity crises and explore potential solutions to pave the way for a more sustainable and reliable energy future.

The distinguished speakers for the program were Dr. Gideon Ofosu-Peasah, an Energy Economist and Minerals Analyst at the Africa Centre for Energy and Environmental Sustainability, and Xatse Derick Emmanuel, a PhD Candidate of Finance and Research and Policy Analyst at the Institute for Energy Security (IES).

Expert Perspectives:

Dr. Gideon Ofosu-Peasah shed light on the governance issues facing State-Owned Enterprises (SOEs) in the power sector, particularly concerning the politicized appointments of board members and CEOs/MDs. This politicization often impedes “hard “decision-making and policy implementation, regardless of the political consequences.

Consequently, transparently communicating the true causes of irregular power supply becomes challenging. The fundamental issues stem from chronic financial problems resulting in short-term technical challenges. Cash flow difficulties by Power Generators, arising from unpaid revenue for services.

Dr. Ofosu-Peasah opined that inadequate gas supply and insufficient liquid stock reserves by the government exacerbate the sector's strain. Specific challenges, such as the unavailability of certain power units due to maintenance issues, exacerbate the generation shortfalls. This shortfall, estimated at 530-700 MW during peak periods and 200MW-300 MW during off-peak periods has triggered the need for load management resulting in GRIDCO transmitting less power than required at Bulk Supply Points (BSPs).

Despite these critical issues, stakeholders struggle to effectively communicate the financial underpinnings of the sector's challenges to the public. This underscores the imperative of transparency in addressing the sector's underlying challenges and securing sustainable funding for its long-term stability and reliability.

Xatse Derick Emmanuel spoke about the Cash waterfall mechanism, ECG losses and issues around excess capacity. The PURC report for January 2024 highlighted significant shortfalls in ECG's ability to meet its financial obligations to both Category A and B players within the energy sector.

For instance, while ECG was expected to make monthly payments totalling 514 million cedis to Category A players (IPGs), the actual payment amounted to only 120 million cedis, resulting in a deficit of 394 million cedis. Similarly, payments to Category B players fell short by 145 million cedis.

Consequently, entities such as GRIDCO, VRA, Safisana, Meienergy, and Early Power received no payments for January, exacerbating financial strain across the sector.

Distribution losses have emerged as a pressing concern, with ECG recording an upward trend, currently standing at approximately 30.6%. These losses translate directly into revenue loss, further complicating the company's financial outlook. Additionally, transmission losses, attributed to GRIDCo, account for around 4.1% of power transmitted, compounding the overall loss of revenue.

Despite having sufficient generation capacity, with a dependency capacity of around 4900MW capable of meeting daily peak demand of 3600MW, financial constraints impede effective utilization of this capacity. The failure of the government, through the Ministry of Finance, to release allocated funds further exacerbates the situation, hindering ECG's ability to address operational challenges and meet its financial obligations.

Way Forward:

In addressing these challenges, Dr. Gideon Ofosu-Peasah proposed a series of measures to enhance revenue generation for ECG, including the implementation of aggressive revenue mobilization strategies, adherence to the cash waterfall formula, and meeting a 10-day benchmark for meter supply upon application and finalizing the modalities of private sector participation for ECG.

He also emphasized the importance of investment across the electricity sector value chains to upgrade equipment and systems and accelerate the installation of prepaid meters. Additionally, Dr. Ofosu-Peasah highlighted the need for improved governance to address gaps in the supply and distribution chain.

Mr. Xatse emphasizes the importance of addressing distribution losses, which currently account for approximately 30. 6% of the power transmitted to ECG. He affirmed that by implementing measures to reduce these losses, such as upgrading infrastructure and improving operational efficiency, dealing with illegal connections, ECG can enhance its revenue mobilization efforts while also improving the overall performance of the power distribution network for full cost recovery.

This, in turn, will contribute to the sustainability and long-term viability of Ghana's electricity sector. ECG must do everything in its power to comply with the Cash Waterfall mechanism to help address the liquidity constraints.

The discussions at THE DIALOGUE's maiden edition under the theme "Electricity Crises: Outlook and Way Forward" provided invaluable insights into the challenges facing Ghana's power sector and outlined actionable solutions to address them.

It is evident that transparent communication, sustainable funding, and proactive strategies are essential to ensure a reliable and resilient energy future for Ghana.