Feature Article : "The views expressed here are those of the authors and do not necessarily represent or reflect the views of Modernghana.com."

We have addressed in various media different aspects of the energy situation in this country. This approach has not succeeded very much in depicting the full scale of the challenge that confronts us; nor has it been very helpful in portraying the inter-linkages between the various problems. But energy expenditure constitutes nearly 20% of our GDP, demonstrating the extreme significance of the sector, and making it critical that institutions like ours dedicate significant resources to understanding its relationship with Ghana's broader economic situation.

In this and future overviews, we will continue our public education drive by interweaving different shades of the chaos afflicting our energy sector. We try to offer constructive suggestions implicitly, by emphasizing the obvious flaws in the system and thus, we hope, expanding the scope of debate.

We begin with the myths and close with the brutal realities.

1. Renewables
There is an oft-repeated argument that Ghana has completely neglected renewable energies, particularly solar, in its search for strategic energy solutions. To the extent that there has been any neglect, it has been one of effective energy policy generally. What attention the energy sector has received renewables too have had their share, in due accordance with their promise and the extent of public resources.

Indeed the Ministry of Energy used to run a 50 MW solar plant (the biggest such facility in Ghana) until recently when, according to our information, it had to be decommissioned for refurbishment.

In 1997 thereabouts, the Kingdom of Spain provided Ghana with a $5 million facility to develop off-grid solar electrification of 10 villages in the “home and community systems” approach. Water pumps and streetlights were expected to be powered with the system. Not too long thereafter, a loan of $185 million to be syndicated by DANIDA, IDA, ORET, NDF, and CDF was designed with the participation of Ghana's Ministry of Mines & Energy for onward disbursement towards solar power production projects. EMPRETEC, GRATIS, KITE, and CEDEP were enlisted to provide the requisite technical support. Two solar service centers were to be constructed. Indeed, even the current budget has provisions for three solar mini-grids.

Meanwhile, 40 small hydro plant sites have been identified by the Energy Commission for potential development. We partly share the Commission's enthusiasm for hydro. The experience of Portugal is quite relevant in this regard. For many years, solar held the fascination of the country's policy elite because of the country's fortuitous location in the well-burnished Mediterranean. Several hundreds of millions of dollars later, however, the consensus has metamorphosised into an emphasis on wind, and a commitment to world leadership in tidal. The reason was simple: despite the hype, the price/output ratio for solar is still far from favourable, and anticipated trends in technology improvement do not in any way favor solar over either tidal or wind.

The price/output ratio for hydro in Ghana certainly outshines that of solar. Perhaps, that brutal reality underlies the Energy Commission's focus on small hydro. To repeat, we concur.

While biofuels hold some promise, serious land tenure problems (we have first-hand evidence of the collapse of at least two major projects because of this issue), water husbandry constraints, and general agronomic pressures undermine the full prospects.

Which is not to say that renewables should not play a role in our energy security but rather that we should not hype their contribution. Off-grid renewable projects can only be marginal to our need, whereas the possibility of selling to the national grid (just as of biofuel producers selling to BOST) might significantly improve upon the incentives of independent power producers (IPPs) to enter the renewables sector and enhance total output. That possibility advises a strong focus on smart grid infrastructure/policy investment as a necessary precursor and pre-requisite for renewable power production.

2. Petroleum Refining
Imports of crude oil in Ghana amount to little over 15 million barrels of oil a year (not much more than Russia's daily output). A little more than 9 million barrels of this quantity go to the oil refinery, while 6 million is allocated to the power plants run by the VRA and its surrogates.

67.5% of Ghana's petroleum product imports are made up of gas oil. Premium (“petrol”) constitutes 23%. 33.3% of the Tema Oil Refinery's output is of Gas oil (“diesel”), while 41.4% is of gasoline (“petrol”). The shortfall in local production of gas oil is interesting, considering the role of the fuel in mass transport.

TOR's problem is without doubt one of under-capacity. The problems with its current set-up reads like a rhyming litany, but it is no trifling matter: low capacity of the premium reformer; low capacity of the aged utility units; continuing, if reduced, losses at the refined product loading gantry; low capacity to blend different grades of crude oil (and thus to benefit from the incorporation of cheaper variants of crude); double the acceptable internal power generation waste levels due to a low-capacity power recycling mechanism; use of hydro-cokers rather than more efficient bi-metallic converters; storage, conversion systems and vacuum distillation unit gaps.

Recapitalisation and the resultant re-capacitation should enable the production of bitumen for use in our intensive road-building program, and much more besides.

According to Ghana's own Ministry of Energy, some of TOR's key ex-refinery products are sold in some of our neighbouring countries for double the going rate in Ghana. Clearly, the most rational solution to the refinery's problem is therefore for it to “grow its way out” of its current crisis, by expanding to leverage its apparent efficiencies across the sub-region.

On that score we agree with the Tema Oil Refinery's own strategic plan to scale up refining capacity to an eventual 145,000 barrel capacity, and disagree with the Ghana Strategic National Energy Plan's projection of 115,000 barrel capacity by 2020 as unambitious.

Of course, as in every export-led growth model, there are risks of counter-party protectionism. Should Cote D'Ivoire, for instance, see the matter as one of energy security it might consider its own aggressive refinery expansion plans with a view to trading on efficiency gains within the region (as it has done in the electricity industry).

It would be wise for Ghana to better align its capacity expansion program with its industrialization plan. It appears from the evidence that an expansion of diesel and gas-fired thermal power capacity should provide a destination for a considerable proportion of ex-refinery output within the context of a policy that seeks to make Ghana the hub of energy-intensive industries within the sub-region. Aluminum offers clear possibilities, but the metal's price-sensitivity to wild fluctuations on the international market (witness China's withdrawal from its commitment to finance a multi-billion dollar bauxite-to-aluminum project in Guinea) advises that we also pay attention to the use of aluminum in local light manufacturing. Pre-fabricated housing is an industry that consumes significant quantities of aluminum. Solutions to our present housing crisis could thus be aligned with an energy-cum-integrated industry strategy, building vital, sustainable, linkages. What is more, the self-evident financial viability of such a strategy commends itself very well to market criteria and therefore to vigorous private sector participation.

3. Power Production
Crude oil dynamics have become inseparably bound with energy generation dynamics in this country following the growing intensity of thermal in our energy mix, with ramifications that are visible all around us. 80% of the trade deficit in crisis-plagued 2001 was constituted by oil imports alone. Indeed between 2000 and 2004 the import bill for crude surged from $280 million to $500 million. As much as 76% of the Sovereign bond had to go to underwrite struggling VRA's investments. Government of Ghana has also been providing direct cash payments to cover VRA's operational costs incurred for the import of crude oil, just so it can avoid the reality that it is providing “subsidies” to the sector. The current strategy is to “ringfence” VRA's gas turbine capital expenditures and to transfer all transmission infrastructure to GRIDCO, a newer kid on the block. We have grave doubts as to whether this approach amounts to more than treating the symptoms and ignoring the malady. The underlying problem is of course strategy and policy instability.

It is definitely not for nothing that most energy producers in the country are still operating on provisional licenses from the Energy Commission. Energy appears to be an area of national life very much in flux. But for how much longer can we endure? Continued    Source: Bright B. Simons

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