Custom duties hinder renewables penetration

Although the Renewable Energy Act says importing renewable energy systems should attract zero duties, investors in the sector say that is not the case at the ports, as custom officials feign knowledge of the waiver and haggle with them over duties.

“The duties range from 5% to 20%; it depends on who you meet at the port, and they insist that you have to pay this,” said Terry Yaw Ampofo, Technical Director at Crown Subsea Services, a company which recently installed a 100killowatts solar system for Sethi Steel Limited, an iron rods manufacturing concern in Tema.

“They [custom officers] just look at something and say: No, you have to pay 15%. Even though you are using a specific HS code, which says it should be zero tax, you get there, and you have to go up and down; twelve hours, you have to be at the port because you are haggling over duties.”

The unbearable cost of grid power in recent times has made heavy energy consumers like Sethi Steel seek out alternative sources, but Terry Ampofo believes if the government does not enforce the law, its aim of 10percent renewables by 2020 will not happen.

“If I pay a lot of tax, I have to pass it on to the customer, and when the customer gets the quotation and it’s too high they do not want to do it. I suffer, the customer suffers and the government suffers, because the customers are not relieving by using the solar panels to relieve the pressure on the national grid.

So, the government has to, really, enforce zero-tariffs because most western countries don’t tax green energy, and that promotes companies like us to really spearhead and reduce the carbon footprint that ECOWAS wants the Ghana government to make sure that in some years’ time, is much lower.”

Another company with similar concerns is Safi Sana Ghana Limited, which is using human and slaughter house waste, as well as waste from the markets at Ashaiman, to generate electricity.

Safi Sana has a 30tonne capacity bio digester at Adjei Kojo, Near Ashaiman in the Greater Accra Region, and it intends to replicate the model, which was funded by the African Development Bank and the Dutch government, in all ten regions of the country.

Its Country Manager, Raymond Ategbi Okrofu, does not, however, want to, again, endure the hassle he and his team went through at the ports, and in trying to secure permits for the first project,

“At a point, we even had to pay demurrage because we were dragging this issue with the port authorities until the allowable time passed and eventually we had to pay the duty and pay demurrage,” Raymond Okrofu told the B&FT.

“And it costs a lot to clear things like these from the ports because the equipment is expensive and you know the tariff is charged based on the cost of the item.

So, that was one clear frustration that we had. We thought it’s a straight forward thing, and the people at the ports and the Ministry of Finance and co should know this. But then when we started we realised it wasn’t the case.”

Then, again, Raymond said it took his team about a year and a half to put up the project, when in actual fact, it can be done in six months, all due to the slow pace at which government machinery moves.

“The machine and everything was already assembled. So, we only did the civil works, and the installation itself can be done in a month. But getting permits, getting papers signed, was an uphill task,” he said.

At the rate things are moving, Raymond Okrofu is not convinced the 10percent renewable energy target will be met by the set date.

Industry players argue that, if the government showed more commitment, solar energy alone could take care of the modest target, with bio and wind energy playing a supporting role.

Maxmilliam Kwarteng of Gramax Energy Group, estimates that the country has a solar power potential of 240,000 megawatts, whilst total installed capacity stands at around 120MW, which is about 0.0005% of the potential.

“On a competitive scale, solar Power in Ghana is way below that of other widely known energy sources due to economic drawbacks and other deep rooted policy inertia,” he argues.

“Accordingly, for Ghana to make any significant progress in developing its renewable energy potential, major policy initiatives must be developed and leveraged upon to drive interest and encourage investment.”