Finance Minister, Ken Ofori-Atta has revealed that 60 per cent of the total power generated is going waste because Ghanaians are only consuming 40 per cent of it.
He explained during the presentation of the mid-year budget review to parliament on Monday, 29 July 2019 that the government is paying for the unused 60 per cent, meaning that the government is “throwing away money by paying for the remaining 60 per cent of excess capacity which we do not actually consume.”
Mr Ofori-Atta told the legislature that: “Firstly, excess electricity generation which was procured during the NDC regime from Independent Power Producers (IPPs), including Emergency Power Producers, at exorbitant prices under flawed take-or-pay contracts. Currently, according to the Energy Commission, the country has installed power generation capacity of 5,083 MW, dependable capacity of 4,593 MW and peak demand of around 2,700 MW. So, our installed capacity is almost double our peak demand. Notably, 2,300 MW of the installed capacity has been contracted on a take-or-pay basis.
“On average, less than 40 per cent of the contracted take-or-pay capacity is actually used, meaning that we are basically throwing away money by paying for the remaining 60 per cent of excess capacity which we do not actually consume. In monetary terms, what this means is that we are paying over half a billion U.S. dollars or over GHS2.5 billion annually for power generation capacity that we do not need.”
He added: “Regarding gas, Ghana has contracted for around 750 mmscf per day by 2023. Current demand is around 250 mmscf per day, and this is projected to rise to between 450 and 550 mmscf per day by 2023. All things being equal, there is projected oversupply of 200 to 300 mmscf per day by 2023. About 640 mmscf of the contracted gas supply is on a take-or-pay basis, meaning we have to pay whether we use it or not.
“From 2020, we will be facing annual excess gas capacity charges of between US$550 and US$850 million every year. Currently, for Sankofa Offshore Cape Three Points gas alone, we pay over $51 million a month under a take-or-pay contract for 154 mmscf per day even though we only actually take 60 mmscf per day on average.”