Ghana needs functioning renewable energy fund

By Samuel Hinneh

Many countries globally are gradually shifting towards the use of renewable energy to generate the required energy to power industries and for domestic use in the face of climate change. The era of the application of fossil fuels in turn is giving way to a more sustainable and environmentally friendly means of generating energy given the projected increase in population and rise in urbanisation to 9.6 billion people by 2050, according to figures from the United Nations. Notwithstanding the immense benefits of renewable energy, there is a school of thought that it is very expensive to embark on in the short term but cost effective in the long term. The ability therefore to raise the needed funds becomes very critical to the full deployment of renewable energy in the energy mix.

Like many countries in Sub Saharan Africa, Ghana is currently going through energy crisis. Simply, the country is unable to meet energy demand, partly due to population growth, lack of implementation of energy policies, financial difficulties, among others. For instance the Vision 2020 plan of Ghana outlined policy directions to ensure consistent power supply in the country, by contributing 10% of the country’s energy mix by the year 2020 but as policy makers, and leaders felt reluctant to implement these policies, Ghana finds itself in the ongoing power crisis with businesses laying off workers and some even folding up as well as shutting down their operations.

To ensure the full utilisation of renewable energy, Ghana passed the Renewable Energy Act 2011 to provide for the development, management, utilization, sustainability and adequate supply of renewable energy for generation of heat and power and related matters. Section of the act also provides for the establishment of the Renewable Energy Fund, which is yet to function to serve the purpose of providing financial resources for the promotion, development, sustainable management and utilization of renewable energy sources.

For the purposes of achieving the objective of the fund, moneys from the fund shall be applied primarily to the provision of financial incentives, feed-in-tariffs, capital subsidies, production based subsidies and equity participation for grid interactive renewable electricity, mini-grid and off-grid renewable power systems for remote areas and island, renewable energy projects for non-electricity purposes, etc. Moneys from the fund may be applied for the promotion of scientific, technological and innovative research into renewable energy, research into the establishment of standards for the utilization of renewable energy, among others.

Kofi S. Boahen, Lead, Energy Desk of IMANI Center for Policy & Education, says the country is currently beset with power generation challenges, with thermal generation leading the fight to fill that gap as private capital is injected into several thermal projects currently underway in Ghana.

"Little attention has been paid to the potential of renewable energy to also help fill that generational gap. Thus, the object of the Renewable Energy Fund to provide financial resources to promote and develop the sustainable management and utilisation of renewable energy sources is welcome.

"The sources of renewable energy are all around us, as a people, however, sensitization and education on the benefits of consumers switching to these sources as complements to grid power has been poor.

"The fund will also seek to provide financial incentives, capital subsidies and production based subsidies; interventions that are necessary to alleviate the challenges faced by investors who seek to provide renewable energy offerings,” Boahen noted.

According to him proper execution of this object will lead to more power generation, and less dependence on grid power.

Mr Boahen indicated that the primary issue is funding, saying "the government currently finds itself in a financial conundrum; depreciating currency, mounting debts, labour agitations for better conditions of service and others. Thus, demand for limited financial resources is huge, as such attention and focus for raising monies for the Fund is on the back burner.”

The President, John Dramani Mahama stated during the state of the nation address in February 2015 that Ghanaians would pay an increase on the Energy Fund on petroleum products. The levy increased from Gp0.05 to Gp1, part of which would be used to establish a renewable energy fund. He noted that, the government intends to introduce an ancillary service charge of Gp1per kilowatt hour of electricity transmitted to generate revenue for investment in renewable energy. According to the president, part of this charge would also be used to fund solar energy in the country.

"Obviously, monies from the Fund will assist in the promotion of renewable energy sources and its utilisation. The challenges to adoption of renewable energy are behavioural and financial (consumer side), thus extensive promotion will help to mitigate the behavioural challenge.”

Mr Boahen emphasised that the current absence of the fund can also not serve as a tenable excuse for the government, since the Fund is not the only route to getting consumers to adopt renewable energy sources. He added that legislative instruments and other non-financial policies such as tax incentives, reductions in import tariffs, etc can also provide the platform for private investment to promote the usage of renewable energy.

Mrs Dorothy Adjei, the programme officer in charge of bioenergy at Ghana Energy Commission, says the structure of the fund has already been defined, through a consultancy service funded by the European Union.

"What is left with the fund is actually to open the account and letters have been written to the Bank of Ghana in connection to that as well. At this moment, it is far advanced,” she disclosed.

The Executive Director of PTL Technologies, Mr Michael M. Mikado said the government of Ghana needs to remove all taxes on renewable energy products.

"If the government should give funds to companies that is into renewable energy, lots of companies will mushroom up now. People that have contacts will be seen in the forefront, at the end of it all nothing will come out of it.

"I believe renewable energy products should be completely tax free, nothing at all on it, so that people can bring in the products which will bring about competition, hence people will be able to buy solar panels and fix them on their roof tops at affordable prices,” he indicated.

He added that there is the need for a law that ensures that at least 10-25% of energy consumption comes from renewable energy to promote the use of renewable energy products in the country.

He believes that renewable energy provides for reliable energy supply and is cost effective in the long term, saying that "renewable energy can mitigate Ghana’s energy problem by at least 50%.”