Meeting Generation Target Of 5,000mw: Wasteful Investments Or Ensuring Adequate Reserve Margin? - EPRI

Government's Interventions

Even though the electricity crisis in Ghana is still precarious, there is nonetheless hope on the horizon that there will be regular supply of light soon. In recent events Volta River Authority (VRA) sponsored a tour with journalists and civil society members to selected power generation plants in the country, which proved that the major interventions initiated by this government to end the load shedding are yielding positive results.

It is instructive to observe that these interventions have the potential of adding around 500 megawatts to the generation stock. The breakdown is as follows: the Kpone Thermal Plant (221MW), the Tico expansion project (110MW), the Asogli Phase II (120MW) and the Tema Thermal plant Expansion Project (38MW) spearheaded by the VRA and the government that have reached various stages of completion.

The emergence of power plants such as the KarPowership-IPP project (225MW), the Ameri Project (250MW), the Gei Project (110MW), the AKSA (370MW); the TEI (110MW), and the General Electric (300MW) are also on schedule. A number of them could come to fruition by the end of this year, while others can come on stream by the end of 2016 to 2017, and with the remaining generating power by 2018. The Karpower ship is set to sail to Ghana in September and to start power generation by October, 2015. Berthing grounds have already been prepared to herald its immediate operations on arrival.

Given that the country's installed capacity is currently at 2,845 MW, it stands to show that the prospects of the 2016 government generation target are achievable, if the agreed financial commitments are brought to bear on the projects by various stakeholders involved. At which time skeptics who doubt their feasibility would have heaved a sigh of relief.

Mathematically, adding the total thermal plants of 500MW and the emergence of power plants of 1,800MW together with the already installed capacity of 2,845MW, sums up to a total installed generation capacity of 5,145MW, exceeding the government's generation target of 5,000MW. Meanwhile, other plans such as the constructions of Cenpower (350MW), Jacobsen Electro (360MW), and General Electric (300MW) are also in the pipeline.

It is therefore the conviction of Energy Policy & Research Institute (EPRI) that if these ongoing power plants are completed by their timelines, the current deficit between 400 and 800MW would have been brought under control by the end of 2015, and most likely to finally bid it farewell in 2016. EPRI therefore commends the government for this unprecedented milestone in its sustained attempts towards bringing the electricity crisis to normalcy.

Fallacy of Argument

EPRI however strongly disagrees with some energy policy analysts especially those at Africa Centre for Energy Policy (ACEP) who hold the view that these quantum increases in the emergency power plants could be "wasteful". How wasteful could they be?

At face value, their assessments look plausible but after deep analysis their assertion is most superficial to say the least. Several factors ridicule their stand point. Firstly, ACEP did not seem to take into consideration the demand and supply dynamics of the country. The trajectory of the power sector is more complex to make that simple analogy.

Power Demand Dynamics

The increasing demand of electricity without serious interventions from previous governments is the reason why Ghanaians suffered electricity outages in 1983, 1998, 2006 and 2007. Considering the 2007 electricity crisis, the peak demand was 1,300MW with only 120MW deficit. The solution could have been rectified but for the ad hoc measures that were taken.

Afterwards, the demand growth was increased to about 10% every year. Without corresponding to a 10% generation yearly. Therefore to overcome this growing deficit, the previous NPP administration set a generation target of 3,500MW to be achieved by 2013 which eluded the country.

This called for strategic and critical planning by companies in the value chain: VRA for generation, Ghana Grid Company (GRIDCo) for transmission and Electricity Company of Ghana (ECG) for distribution; if we want to banish the electricity crisis from Ghana once and for all. In view of this, the current government avowed the generation target to increase the installed power generation capacity from 2,711.5 MW in 2013 to 5,000MW by 2016 with the prime objective of achieving universal electricity penetration in Ghana.

Ghana's electricity demand has been increasing at the current rate of 10-15% yearly. For instance, the peak demand in 2011 was 1,664.3MW from the demand of 1,505.9MW in 2010 representing a 10.52 percentage demand increase. Subsequently the demand growth peaked at 1,728.9MW in 2012, and further increased to a peak demand of 1,942.9MW in 2013. A whopping peak demand increase of about 214MW (12.4%) for this period.

Several factors amount to the high electricity demand in the country, such as expanding commercial and industrial sectors together with high population growth and urbanisation. Changing lifestyles to suit our "lower middle income status" are also cited as the driving force behind the surge. Therefore, the current peak demand of 2,300MW with the deficit wavering around 400 to 600 megawatts explains why Ghana has been in partial darkness for almost four years. In the worst case scenario, the deficit could even increase to as much as 800MW, meaning that load shedding will intensify.

It therefore implies that by the end of this year the peak demand of 2,300MW would have been increased by 15%, resulting to 2,645MW and the projection is that the peak demand of 2,300MW could be doubled by the end of 2021. Electricity access in Ghana is over 70% second to South Africa in the continent. Ghana's penetration level is projected to increase to 80% in the next few years. This implies that the current available demand of 1,650MW will rather be woefully inadequate to suffice our peak demand of 2,050MW.

Power Supply Dynamics

Apart from demand dynamics that will make their already poor position weak, the generation conditions of various power plants at varying times should not be discounted in the analysis. In an attempt to solve the upsurge of demand, energy leadership ended up taking decisions that were wasteful to the state.

According to Mr. Kwaku Awotwi, former VRA boss, he revealed at the 20th edition of Ghana Journalist Awards' night that the nation over the period of fifteen years wasted nearly half a billion dollars on three thermal power projects comprising T3(132MW), the Osagyefo Barge (125MW) and the "toy" diesel engines (126MW) that have generated no power up to date. Such ad hoc measures in the past could have only made the electricity crisis worse and repetitive. EPRI’s candid opinion is that this wanton dissipation of our scarce resources should not go unpunished. A typical case of causing financial loss to state.

Challenges that include inadequate gas, expensive light crude oil, level of hydro dams, equipment failures and periodic maintenance always makes it extremely impossible for all installed power plants to operate optimally and simultaneously. For example, due to poor reservoir management and the low level of Akosombo Dam compels it to generate below its maximum capacity of 1,020MW. Likewise the other power plants. Therefore, the supply side management from the various sources is crucial if stakeholders in the supply chain want the current power deficit to be fixed holistically.

Adequate Reserve Margin

Hence, a reserve margin (RM) is normally required to take care of any shortfall that may arise from these unforeseen circumstances in the future. RM is the difference between maximum electricity supply and peak electricity demand at any particular time. By international standard, 20% of reserve margin is required to maintain reliable and secure supply of electricity. Meanwhile, the International Energy Agency (IEA) even put it from 20% to 35%.

Considering the peak demand that is expected to be more than doubled in six years’ time, the projected total electricity generation will definitely be above 5,000MW which will not be enough to satisfy the local demand. To maintain a required reserve margin, the country will need at least 1,000MW more generation capacity if we are to maintain the international standard of 20 percent.

Our growing appetite for electricity and economic growth signifies that we diversify our generation sources further. The obstacles associated with the hydro and thermal generations in Ghana have emphasised the need for power diversification. That is why clean coal proposals should be considered seriously. EPRI is aware that the "Clean Coal Bill" is laid before parliament for consideration. If the "clean coal power" initiative of 1,200MW is executed by Shenzhen Energy Group (SEG) in the last quarter of 2018, it will enhance the country's reserve margin and put the country in a comfortable zone.

Taking into consideration of our annual peak demand of between 10% and 15% and the reserve margin of 20% was projected that will give the country reliable and regular supply of power. It is therefore imperative that there are sufficient reserve margins to cater for sudden loss of generation plants due to equipment failures, routine maintenance, and lack of fuel feed or poor hydro reservoir management. For instance, Singapore has a total installed capacity of 12,000 MW and keeps a reserve margin of about 60%, while Malaysia has a reserve capacity of about 26% with an installed capacity of 20,817 MW.

Ghana as a Net Exporter of Power

One important aspect that was also overlooked is the government's objective of making Ghana a hub of electricity generation in the West Africa Sub-Region, making her a net exporter of power. Therefore any surplus emanating from over 5,000MW installed capacity could put the country in an economic position to sell it to our neighboring countries whose supply may fall short. It is a well-known fact that Ghana, Benin and Cote d'Ivoire have a power purchase agreement from their respective surpluses under the West African Power Pool (WAPP) arrangements.

These countries could bi-laterally take advantage of these agreements at any given time when the need arises. Quite recently, during Easter, Christmas or major Black Stars matches, Ghana took advantage of the surplus power from Cote d'Ivoire to augment our shortfall. Ghana Grid Company (GRIDCo), the country's electricity transmission company, has built interconnectivity networks with these countries to harness this opportunity.

Available data shows that Ghana's energy demand in the sub-region is more than Cote d'Ivoire, Senegal, Sierra Leone, Burkina Faso, Liberia, Togo and Benin all combined. This therefore implies that Ghana consumes a quarter of West Africa's energy supply. Our energy poverty in the sub-region needs massive capital investment in the sector to turn around. The government of Ghana therefore needs to take the lead in this direction.

Mustapha Iddrisu

Energy Policy Analyst

Energy Policy & Research Institute (EPRI)

Osu - Accra