The preceding week has been a tough one for Ghanaians as the country was ‘momentarily held hostage’ by the Independent Power Producers (IPPs), demanding payment of debt owed.
Independent Power Producers play a significant role in Ghana’s energy sector, controlling 47 percent of the country’s total power generation mix and contributing 67 percent of Ghana’s thermal power. As of May 2021, the six enterprises collectively claim an outstanding debt of approximately $1.73 billion with the debt dating back to January 2021.
Whiles citizens, experts on the one hand, wondered and pondered whether a repeat of the power crisis in 2007 which nearly broke the economy will repeat, government on the other hand was seemingly ‘quiet’ until the last minute to react.
For all its worth, one of the pillars on which the economy thrives most significantly, being energy, must be properly appropriated, harnessed, and regulated for optimum delivery, as it impacts not just governmental dealings, policies and institutions, but private businesses which feed people and provides daily earnings.
However, Ghana as it stands now, is beginning to lose its grip on the ‘energy pillar’ that fundamentally drives industrial operations and households. It’s certainly no rocket science that we need electricity from keeping fresh basic necessities in a typical household to powering industries, and one would believe that a lot more thoroughness and investment would be channeled in that area to avert a crisis.
The Independent Power Producers (IPPs) being at variance with Ghana’s government over the ‘pricy’ debt has also opened wounds between political parties as to who got the country into this economic mess.
One would readily think that when confronted with challenges, finding solutions is the best alternative and not a spar between a minority which justifies the PPAs as one which was needed at the time, and a ruling government which insists it was a poor negotiation.
Whereas some experts blame government for gross mismanagement, the Electricity Company of Ghana (ECG), in all candor, has failed outstandingly as a distributor, especially in consolidating revenues for power sold to both individuals and institutions to expedite payment to IPPs. Indeed, they have every right to claim what’s theirs.
Revamping Ghana’s energy sector for optimal efficiency
Yes, the IPPs have suspended their threat to shutdown their plants and operation after engagements with both government and ECG. However, whatever government is able to cough up will only be a palliative solution and the country urgently requires a more permanent solution which would avert a resurfacing of such unruly threat which serves as a distraction and disruption. Bottom-line? Government must holistically and permanently address the underlying problem.
Undoubtedly, ECG may have carried out a revenue mobilization exercise to retrieve a substantial amount of debt, but that is beside the point, because being a player in the value chain, it has obviously become the weakest link and if the country is to make any headway with IPPs in the future, a shakeup needs to be undertaken.
Government necessarily must redeem itself from this shame and reputational damage as it is going to send the wrong signal to potential investors. Instead of restructuring the debt of the IPPs, government must restructure the operations of key players within the energy sector value chain and extend its reach to other viable opportunities.
Th country’s energy production has changed from 85% hydro and 14% thermal to 38% hydro and 60% thermal. This has caused high tariffs due to gas price volatility and erratic gas supply. Forty percent of production costs for industries in Ghana are attributed to electricity costs, making it difficult for Ghanaian industries to stay competitive.
While government is currently considering nuclear energy as a viable long-term solution to the country’s energy demands, modern advancements in power-generation technology have allowed many other countries to move beyond legacy solutions towards more sustainable methods of addressing their citizens’ energy needs, which include biomass, solar and wind generation.
These greener and more eco-friendly solutions will not only bring Ghana in line with global energy standards but ensure that the nation is more secure as a consequence of having a diverse portfolio of robust energy solutions. In such a case, disruptions in power supply will be far less likely and local businesses will not be burdened with the current challenges.
The solar plant will constitute one more strategic move on the part of the government to increase the renewable energy mix of the nation’s energy sector. Furthermore, renewable energy projects such as solar and biomass plants boost the country’s economy in other ways, serving as a source of direct and indirect employment.
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