Dr Yusif Sulemana, an Energy Expert and Senior Oil Production Operations Specialist with Petroleum Development Oman, has suggested to the government to revise the local content requirement to enhance private sector participation in the renewable energy space.
Ghana’s renewable energy space still remains underexploited after more than a decade of formulating policies and championing actions aimed at adding a targeted amount of renewable energies into the country’s energy mix as well as fighting energy poverty.
As revealed in a recent PwC report, private sector actors in the renewable energy space find the local content requirement for the renewable energy space as posing greater risk and stifling investment in renewable energies. In a survey conducted by PwC, more than half of private sector respondents considered the local content requirements as demanding and a significant barrier to investment.
The 2017 Legislative Instrument (L.I. 2354) which establishes the local content and participation in the electricity supply industry defines stringent minimum levels of Ghanaian ownership and participation in renewable energy projects.
L.I. Requirements Are Overambitious
Per the L.I. 2354 mandates, local content requirements are expected to reach a minimum of 51% local ownership, 80%-100% local employment in different job categories, and 80%-100% locally manufactured or assembled renewable technologies within 5-10 years.
“This L.I. is overambitious and over nationalistic to say the least… It is in an advanced stage that the government can advocate for such, and it is not surprising that we haven’t been able to achieve that much within the renewable energy space.
“If we keep doing what we did previously (2010-2020), where we couldn’t do anything (only less than 1% of renewable energies), unless we substantially do something different; If we follow through this trajectory, where we put a lot of stringent regulatory frameworks that doesn’t allow free private sector participation, then we are not going to reach the target by 2030.”
Dr Sulemana, Energy expert
Making available provisions such as the 2017 legislative instrument in terms of its goal is “not entirely a bad idea” but it is also “not for beginners” as a country that is expected to ramp up the penetration of renewable energies.
Why such a law is in place, is in part, because of fears that “renewables will come to the space, and are going to displace the world of hydrocarbons and that we are not going to be able to take advantage of our fossil fuel assets.”
Expectations are that renewables will complement the country’s fossil fuel resources in order to enhance electricity penetration, currently around 86% including strategies in place to reach universal access of 100% by 2030, Dr Sulemana disclosed.
Even so, the country is struggling with the local content participation within the oil and gas sector, how much more the renewable energy space, he stressed. “We need to step up gradually and gravitate to a point where these form of requirements would be warranted”.
Dr Sulemana indicated that such local content requirements can be put in place, if the country has the “right technology and the financial muscle” to champion the renewable energies agenda, without which the current laws may stifle growth of the sector.
Global Investments in Renewable Energies Increase Before and After COP26
This notwithstanding, investments into renewable energies are growing worldwide at a fast pace. This is driven by stronger support from government policies and more ambitious clean energy goals announced before and during the COP26 climate Change Conference, according to the International Energy Agency (IEA).
While Ghana’s renewable energy footprint remains miniscule, the International Energy Agency’s analysis places four markets at the top, considering the rate of growth of the renewable energies on the global front: China, India, US and Europe accounting for 80% of renewable capacity expansion worldwide. Currently, Ghana is doing less than 4% of renewable energies within its energy mix.
With such strict regulatory frameworks in place, the country’s ambition of meeting its 10% renewable energy target may end up in a fiasco, only to rehash another 10% policy target for another decade.
In fact, these bottlenecks to registering vast growth in renewable energies is not peculiar to Ghana, the IEA points same out as a global phenomenon. In its recent renewables report, the IEA recommended that governments accelerate the growth of renewables by addressing key barriers, such as permitting and grid integration challenges, social acceptance issues, inconsistent policy approaches, and insufficient remuneration.
On the global scale, the IEA forecasts renewable electricity capacity to rise more than 60% from 2020 levels to over 4800 GW by 2026, equivalent to the current total global power capacity of fossil fuels and nuclear combined.
Furthermore, renewables will account for almost 95% of the increase in global power capacity through 2026, with solar Photovoltaic (PV) alone providing more than half, the IEA said. It is expected that the amount of renewable capacity added over the period of 2021 to 2026 will reach 50% higher than from 2015 to 2020.
That said, all of these positives would be possible, if and only if, such laws that appear to impede the growth of renewable energies are discarded or revised and incentives offered to build a stronger renewable energy sector.
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