Improving the Financial Stability and Environmental Sustainability of Ghana’s Energy Sector
“The cost of power to the industry at 19 cents per kilowatt hour is over 30 percent of production cost to industry. The high cost of electricity tariffs continues to render industry uncompetitive” — Seth Twum Akwaboah, Chief Executive Officer, Association of Ghana Industries.
Ghana has faced a series of energy challenges, including high fuel costs to the power sector, that render its manufactured products and processed goods prohibitively expensive, reducing Ghana’s price competitiveness in regional and world markets. Inefficient energy sector planning is the primary culprit, with high power charges paid by a small number of customers and businesses that can afford to pay for it.
To reduce energy arrears and improve efficiency, Power Africa provided technical assistance to the Government of Ghana to identify and implement solutions to mitigate bottlenecks in power generation and reduce costs.
Power Africa’s support contributed significantly to reducing the cost of electricity generation by 19 percent, lowering the overall cost of gas utilized by the sector, and saving $4.7 billion over five years; in the process, removing 1 million tons of carbon dioxide (CO2) emissions annually for 10 years.
“We estimate that the projected cumulative net arrears in the sector have been reduced from $12.6 billion to $7.9 billion. We appreciate the support that USAID has provided and look forward to continuing our strong collaboration to bring Ghana’s energy sector into financial balance” — Letter of support from Professor Kwaku Appiah-Adu Director, M&E and Public Enterprises, Vice President’s Secretariat.
These measures included the 2019 relocation of the 450 MW Karpowership Power Barge, which successfully eliminated Karpowership’s consumption of expensive, imported heavy fuel oil, reduced annual spending on fuel, and facilitated the switch from liquid fuel to natural gas. The switch from liquid fuel to gas for electricity generation will result in significant reductions in CO2 emissions over a 10-year period.
Power Africa also supported completion of the Takoradi-Tema Interconnection Project (TTIP) in May 2020, which has enabled more consumers to use domestic gas and created an outlet for gas that otherwise would have been stranded, saving $269 million in annual fuel costs. The total emissions savings from the Karpowership relocation and from completing TTIP is 10 million tons of CO2 over a 10 year period, equivalent to removing the emissions produced by 27 percent of the cars on Ghana’s roadways.
Power Africa remains committed to working in collaboration with the Government of Ghana to stabilize the finances of the country’s energy sector.