The Energy Associates challenges govts claims about PPAs

The Energy & Associates, Ghana has challenged the many claims made by government communicators about some of the power purchase agreements (PPAs) inherited in 2017.

According to the civil society with interest in energy issues, there seems to be “political deception” being churned out by these communicators.

This was contained in a press release on Monday, May 24.

Find the release below:

TAKE OR PAY: The Usual Deception

Since 2017, we have constantly been told that Ghana is generating power that is not needed yet we have to pay for them because of the agreements signed by the past government. Sometimes figures of $500mil are said to have been saved from cancelling these take-or-pay arrangements, whiles $5bil is presented as savings made from the cancellation of some take- or-pay, all from government communicators, yet not a single publication on these cancelled agreements or how these monies were saved.

The question that keeps running through the minds of the average Ghanaian is that is this really the case or it’s yet another political deception thrown out there? Let’s use data from public reports to cure these usual political “deceptions”.

From the published Ghana’s 2020 Electricity Supply Plan, there is clearly an excess in generation capacity over consumption. On the basis of an electrification rate of 82%, there is clearly a deficit in demand which is not currently being met.

What our real demand currently is, extrapolating from current consumption is a figure approximately 3400 MW, indicating a current unmet deficit in demand of about 300MW – 500MW. It is important to note that these numbers exclude consumption by VALCO at full capacity (+250 MW) and other off grid solutions provided by some mining companies.

In addition, we also know that the average growth in the peak demand far exceeds projections and is partly as a result of making the power available. If we are to therefore demand more of street-lights for instance across the length and breadth of the country, our consumption or demand estimates will be significantly different.

For PPA’s, the number in existence is 43, out of which about 26 or 60% are non-operational and can be described as belonging to speculators looking to exploit a supply deficit opportunity. It therefore costs ECG or the nation zero at this time whilst they remain dormant/non-operational.

Current consumption for electricity ranges between 2800MW to 3100MW and it is covered by available generation capacity of about 3400MW. This available generation capacity satisfies the 18% reserve requirement at the lower threshold of consumption, but not at the higher end.

The available capacity matches closely our consumption leaving very little of an excess if any at all. In the event that there is indeed an excess capacity, we have export opportunities which we have been exploiting and has always been part of our electricity supply plan.

To be able to talk about excess capacity, therefore, the only argument that can be put forward will be if there is a surplus of up to approximately 1000MW being the difference between consumption and available generation capacity on the basis of a 100% electrification rate and assuming a proportional relation with current consumption.

That will put a requirement of available generation capacity at approximately 4100MW compared to current top end consumption estimates of 3100 MW. In that scenario, we will then be paying for the excess since it has been made available.

In addition, we know that two power plants have come online since 2016, providing a total of about 460 MW (Amandi and Cenpower). The excess payments indicated however, have remained at $500m annually since we were first told about them in 2017.

This is quite a weird situation as one will like to see some differences in these numbers on a year-on-year basis and perhaps even an increase with the addition of the 460MW being added. To make this situation even murkier, no announcement to date has ever been made, indicating exactly which PPA’s have been cancelled, under discussion etc.

Finally, in terms of the excess between available capacity and generation capacity, even though there seems to be a significant delta between both figures of about 1600MW, the country does not incur any cost, since that capacity is not available. There is a myriad of reasons why there is always a difference between available capacity and generation capacity, but they are mainly temporary and the result of fuel supply availability, maintenance and plant availability.

Data Source: 2020 Electricity Supply Plan

Source: The Energy & Associates, Ghana