Halt sale of VRA plants – ACEP to government

The government of Ghana must halt all plans to sell thermal plants belonging to the state-owned power producer, Volta River Authority (VRA) to private companies, energy think tank Africa Centre for Energy Policy (ACEP), has said.

The group said the government could rather retire the plants for emergency purposes and allow Independent Power Producers (IPPs) to generate power for domestic consumption to ensure that the IPPs do not become idle while still being paid.

In relation to the sale of the thermal plants, President Nana Addo Dankwa Akufo-Addo, in his first State of the Nation Address, said the country’s energy sector was heavily indebted, thus, threatening reliable power supply.

According to him, efforts by former president John Mahama to solve the energy crisis that bedevilled the country led to a debt of over $2 billion.

“We have inherited a heavily indebted energy sector, with the net debt reaching 2.4 billion U.S. dollars as of December 2016,” the president said. He added: “I have to point out the alarming fact that 800 million U.S. dollars of this debt is owed to local banks, which threatens their stability.”

As a result, he said the government intends listing the VRA and the Ghana Grid Company Limited (GRIDCo) on the Ghana Stock Exchange, explaining that the move was part of a national electricity master plan being developed to solve the country’s debilitating power crisis.

But ACEP, in an assessment of the 2019 budget statement presented to parliament by Finance Minister Ken Ofori-Atta on Thursday, 15 November, said the sale of the VRA plants must be suspended. “The government planned on divesting its interest in the thermal plants of VRA. However, when sold to private companies, it will require an additional Power Purchase Agreement with take or pay conditions. This will increase the 12 surplus requirement and consequently, the government’s commitment to capacity charges.

“The government can rather retire the plants for emergency use and allow IPPs to generate power for domestic consumption. This will ensure that the IPPs do not become idle and still get paid.

“Increase the hydro tariff for VRA and assign cheap power for industry: The need to consume the excess capacity requires that industry benefits from cheaper power to increase consumption and productivity. The government should increase the hydro tariff to offset the loss of revenue to VRA for shutting down their thermal plants. The government can then blend some thermal plants from the IPPs with VRA’s hydro to achieve internationally competitive tariff for heavy industry.

“Develop a robust mechanism to monitor the availability of power plants: The Energy Commission must have a robust dispatch monitoring system for all the IPPs to ensure that all plants declaring availability are genuinely available. This will prevent invoices from plants that are not supposed to bill the consumer.”