Honorable Edward Bawa, the Member of Parliament, for Bongo Constituency has cautioned on the country on the impending catastrophe in the energy sector.
He thus urged that such sectors should be depoliticized to forestall such situations.
He indicated that the country’s debt in the sector has become unsustainable.
“There are certain sectors we don’t have to do politics with and we have to be transparent with them because they are the basis our economy is hinged on.
“One of those areas is energy. Now you have a situation where as a country, the minister of finance’s response he brought to parliament during his censure hearing, the minister was asked to estimate the value of the excess capacity and he was stating around 20 billion. So the finance minister himself said it was about GHS 17.3 billion.”
Edward Bawa
According to him, in the routine course of operations, the IPPs could personally procure the necessary fuel, albeit at an additional cost. However, an alternative arrangement would be to facilitate the fuel supply. By providing the fuel, IPPs would be empowered to generate power independently. This practice is particularly pertinent when the Electricity Company of Ghana (ECG) undergoes the transition to a publicly-owned entity, as fuel is factored into their overall computations. Consequently, when ECG consolidates all revenues, a portion is allocated to cover the expenses associated with fuel consumption.
However, ECG encounters a significant hurdle in meeting these financial obligations. From the outset, there is an unaccounted-for 34% of the power they receive. This discrepancy creates a shortfall in funds available for crucial payments. Among these priority payments are the costs associated with gas transportation and the fuel product itself. When tallying up these deficits, it becomes evident that the government consistently finds itself in the position of having to secure additional funding to bridge the financial gap.
“They gave us a very interesting breakdown; 12.32 billion was for shortage of capacity payment and fuel. What does that mean? Simply what it means is that after ECG has taken the power and has sold and has given it out to the value chain, they still have a shortfall of 12.32 billion. This is because, in most of the contracts we sign, we sign them such that the IPP comes and says I am going to bring the generating plant.”
Edward Bawa
The inability to account for a substantial percentage of the power received by ECG not only complicates financial planning but also necessitates ad-hoc financial interventions from the government to maintain operational stability. In light of these challenges, there is a pressing need for systemic reforms to enhance transparency, streamline financial management, and ensure the sustainability of Ghana’s energy sector.
Challenges In Ghana’s Energy Sector
Without comprehensive measures to address these issues, the energy landscape in Ghana risks continued financial strain and operational inefficiencies.
Ghana, like many developing nations, grapples with a myriad of challenges in its energy sector. One of the primary concerns is the insufficient and unreliable power supply. Frequent power outages, locally known as “dumsor,” have become a common occurrence, hindering industrial growth, disrupting daily life, and impeding the country’s economic progress. This unreliability poses a significant hurdle for businesses and investors, discouraging foreign direct investment and hindering the development of a robust industrial base.
Additionally, the energy sector in Ghana faces financial constraints. The cost of producing and distributing electricity often surpasses the revenue generated from tariffs, leading to financial losses for the state-owned power utility companies. This financial strain limits the ability to invest in infrastructure improvements, maintenance, and the adoption of more sustainable and efficient technologies.
Ghana’s heavy reliance on traditional energy sources, particularly hydroelectric and thermal power, exposes the country to the volatility of global fuel prices and the impacts of climate change. Unpredictable weather patterns affect hydroelectric power generation, leading to reduced output during periods of drought. This vulnerability underscores the necessity of diversifying the energy mix and embracing renewable sources to ensure a stable and sustainable power supply.
