Energy Security and the Future of Ghana

Feature Article Energy Security the pivot of economic development
MAY 13, 2012 LISTEN
Energy Security the pivot of economic development

Ghana is tipped as one of the countries in Africa that is likely to pull itself out of the socio-economic doldrums and to emerge as economic powerhouse in this 21st century. Several factors work in Ghana's favour including political stability, investor-friendly climate, abundant business opportunities, robust judicial system, as well as well educated class (human resource). However these favourable conditions would not help Ghana to industrialise or break into the global league of higher economic achievers without sufficient, adequate, reliable and sustainable supply of energy. History shows that no nation has ever developed, industrialised or joined the global league of progressive economies without adequate, reliable and affordable supplies of energy. Put differently countries that have achieved industrialisation and have done away with poverty did so by placing higher priority on Energy Security.

The recent developments in Ghana's energy sector (with frequent power outages, disruptions and blackouts) indicate that unless Ghana takes critical and urgent steps to strengthen the development and use of local energy resources, invest, build and expand energy infrastructures and to secure enough energy resources abroad, it may lose the plot to build a stronger economy. Indeed Ghana's emergence as a serious economic powerhouse either now or in the future is dependent on her Energy Security.

What does Energy Security mean?
In the words of Dr. Barry Barton Energy Security means “a condition in which a nation and all, or most, of its citizens and businesses have access to sufficient energy resources at reasonable prices for the foreseeable future free from serious risk of major disruption of service”. The European Commission refers to Energy Security as “the ability to ensure that future essential energy needs can be met, both by means of adequate domestic resources worked under economically acceptable conditions or maintained as strategic reserves, and by calling upon accessible and stable external sources supplemented where appropriate by strategic stocks”.

In practical terms Energy Security means securing adequate supply of energy resources (gas, oil, hydro, biofuel, solar, wind) both home and abroad to meet both short and long term demand. It involves not only the production of oil, gas, hydro but also safe transportation and distribution of the energy products to consumers. It involves not only protecting say the gas pipelines coming from Nigeria to Ghana but also oil and gas tankers, oil and gas stations, refineries, oil rigs, sealanes, transportation corridors, power lines, power stations, transformers, cables and other critical infrastructures through which energy is delivered.

Energy Security implies identifying and dealing with all the short term and long term threats, risks, vulnerabilities, crises and costs associated with energy supply and demand and working to either minimise or completely eliminate them. Energy Security also includes maintaining regular investment to expand energy infrastructures to keep up with growing demand and to deliver timely energy to all sectors of the economy. Not only that, Energy Security also means that the workers (management and technical staff) working at various locations within the energy chain also need protection from kidnappers and other criminals. Additionally, the investors that put their money into the development of energy resources and critical energy infrastructures need to have their investments protected i.e. the political and economic environment must be stable.

Why is Energy Security important for Ghana?
Energy Security is essential for Ghana for many reasons. From security point of view, to maintain peace, security, stability and territorial integrity of the country at all times the Armed Forces need fuel to power its ships, boats, aircrafts, armoured vehicles, communication systems and other ground, air and sea operations. The police and other security agencies also need regular supply of fuel to maintain law and order. Indeed serious problems of insecurity would occur including armed robberies and carjacking if the police cannot fuel their vehicles to patrol the country. More importantly most of the modern equipments used by armed forces and other security agencies are such that without reliable energy supply it will be difficult to operate them.

Similarly the Fire Service will be rendered irrelevant during fire accidents if they cannot fuel their vehicles to locations where its services are needed. The barracks and the military bases hosting the men and women of the Ghana Armed Forces, Police, Immigration and Prisons all need fuel to keep them operational at all time. This suggests that Energy Security is closely bound up with the physical security and indeed national security of Ghana. Without adequate and reliable supply of energy to the Armed Forces they may find it very difficult if not impossible to police the coastal waters and keep drug cartels, pirates, illegal fishing vessels from violating the territorial integrity of Ghana.

From economic point of view, critical and strategic economic infrastructures such as Tema and Takoradi harbours, the Kotoka International Airport and other airports and airfields in Kumasi, Takoradi and Tamale are heavily dependent on energy. The communication installations in these locations need constant supply of energy (electricity) to keep them operational. The oil, gas and mining operations at Takoradi, Obuasi, Prestea, Tarkwa, Akwatia and other locations also rely heavily on energy. Likewise the operations of VALCO, GHACEM, AshGold, real estate and other construction companies also require adequate and uninterrupted supply of energy.

Recent studies indicate that investors have gained serious confidence in the Ghanaian economy and many of them wishing to invest in the growing oil and gas sectors in West Africa are using Ghana as a base for their operations. On November 7, 2011 a paper published in the Oil & Gas Journal noted that a number of foreign and local companies (including the London-based investment group Lonrho) have indicated their preparedness to invest and “provide Ghana with a world class backbone of transport and logistical infrastructure, investing in new ports, logistical support centers, and engineering facilities for the offshore industry”. This is a very positive development, the problem however is that these investment overtures would come to naught if reliable and affordable energy supply cannot be guaranteed.

The operations of major financial and banking institutions including the Ghana Stock Exchange, the Bank of Ghana, commercial banks and their ATM systems rely on regular supply of energy. Indeed the Akosombo Dam and Thermal Plants in Takoradi, Tema, and Asogli all need power to generate the electricity they produce. Transportation of people as well the production, distribution and marketing of food, medicines and other goods in the country cannot be possible if the transport sector cannot be supplied with adequate and sufficient supply of diesel and gasoline at affordable prices.

Linked to the point above is the fact that the operations of key institutions of the state i.e. ministries and departments in the country including Defence, Energy, Finance, Foreign Affairs and Interior cannot go on smoothly without a guaranteed supply of energy. Again the activities of major organs of government including Parliament and the Judiciary depend on reliable supply of electricity. Health institutions such as the Korle Bu, Komfo Anokye, and Tamale Teaching Hospitals and other Regional and District Hospitals, polyclinics, and their infrastructures e.g. X-rays, incubators and other life-saving equipments are energy dependent. Educational institutions including universities, polytechnics, secondary schools, nursing and teachers training colleges and libraries cannot operate fully when the security of supply is interrupted.

Households' thermal comfort, their security, safety, education, health, social life, and economic fortunes would negatively be affected without access to regular, adequate, reliable and affordable supply of energy at all times. The above issues explain why Energy Security is so critical for Ghana.

Energy Security: the situation in Ghana
The recent nationwide blackouts and frequent power outages and load shedding signal the deep problems existing in the energy sector. Energy generation has not kept up with demand. While demand in the country is growing by 10 to 15 percent annually, supply is well below demand. Experts believe that Ghana needs about 5000 megawatts of energy to keep up with soaring demand and to achieve full middle income status. Unfortunately energy generation capacity in the country is lower than 2200 megawatts.

A number of factors including neglect, poor management, monopoly and underinvestment in infrastructure have led to supply fallen behind demand, creating the huge supply deficit. The deficit has in turn created huge pressure on existing infrastructures. To add insults to injury most of the critical infrastructures used by VRA, GRIDCo and ECG are obsolete and need replacement. But the inability of the companies to replace them due to weak financial position has resulted in huge load pressure causing system failures which are partly responsible for the nationwide blackouts recently experienced in the country.

Though government intends to increase generation capacity to 5000 megawatts by 2015 it is unlikely that the target would be met given financial challenges facing VRA. According to Dr. Imoro Braimah of Department of Planning-KNUST without increased investments in the power sector, total electricity generation capacity will be only about 2,665 MW by 2015, leaving a deficit of about 46.7%.

Tema Oil Refinery (TOR) the only refinery in Ghana is plagued with a number of problems that make it unable to import and process crude oil to keep up with demand. TOR's processing capacity has barely exceeded its initial capacity since its establishment in 1963 by Dr. Nkrumah. This is hardly any good picture for a country hoping to reach full middle income status. Besides, climate change is seriously altering the amount of rainfall available to generate power from the Akosombo Dam leading to supply disruptions.

The general insecurity in Nigeria and pirates' activities in the Gulf of Guinea also poses serious challenges to Energy Security aspirations of Ghana. For example in the past the gas pipelines coming from Nigeria to Ghana have been attacked by the Niger Delta militants fighting for resource control in Nigeria. In the first quarter of the 2012, Ghana was exposed to serious load shedding when gas imports from Nigeria were disrupted. The disruptions in Nigeria and the intense load shedding that followed in Ghana highlighted how vulnerable Ghana is. This vulnerability may worsen unless the insecurity and disruptions in Nigeria stop.

Similarly ships and oil tankers carrying crude oil to Ghana to be refined at the Tema Oil Refinery have to meander through the pirates' infested waters of the Gulf of Guinea raising security concerns about crude oil import into the country. The pirates-militants-terrorists nexus in Nigeria and the Gulf of Guinea have serious consequences particularly for Energy Security ambitions of Ghana. There are fears that the dreaded Boko Haram terror group may one day turn its attention to oil and gas infrastructures in Nigeria. If that happens to the West Africa Gas Pipeline it would cripple the already weakened energy production capacities in the Nigeria. Ghana would suffer greatly if the security of these infrastructures is breached. Ghana also imports some of her electricity from neighbouring Ivory Coast but given the insecurity in that country relying on energy from there is also problematic.

The economic cost of these blackouts and disruptions run into several hundreds of million of cedis annually. It increases cost of production, and cuts down profits, thereby preventing the companies to expand in order to create jobs. Recently the Association of Ghana Industries ranked energy supply insecurity and disruptions as number one of the 13 major problems facing its members.

What must Ghana do?
So what must Ghana do? If Ghana wants to maintain the momentum in economic growth then it needs to critically look at energy security more comprehensively. First the surest path towards achieving Energy Security is through diversification of both energy mix and energy sources. The energy mix (oil, gas, hydro, thermal, solar, wind, biofuel etc) and energy sources (Nigeria, Angola, Equatorial Guinea, Libya) is a major strategy towards achieving Energy Security. Ghana has a lot of energy potentials herself including gas, solar, wind, hydro and biofuel. If these energy potentials are developed it could make her energy independent/self-sufficient. What is needed is leadership, robust energy policy and the political will to raise the needed funds to develop the local energy resources.

Second the Tema Oil Refinery, GNPC, VRA, GRIDCo, and ECG need to be reformed and restructured to improve efficiency and best industry practice in their operations. To improve Energy Security, further market liberalisation and robust regulatory designs are needed in the power generation, transmission and distribution sectors. The monopoly enjoyed by VRA, GRIDCo, ECG and NED needs to be broken up to allow more independent power producers, distributors and private investors the opportunity to own energy infrastructures and to give consumers wider choices. Third, there must be a determined effort to invest in efficient fuel technologies to reduce waste and losses at production, transmission and consumption levels. Fourth, more cooperation is also needed between Ghana and countries supplying energy to her particularly Nigeria and Ivory Coast.

Fifth the Armed Forces particularly the Navy and the Air Force must be strengthened to increase patrol and surveillance to protect gas pipelines, oil rigs, and oil and gas tankers carrying energy to Ghana. This will help to remove the threat pirates and criminals pose to the country's Energy Security ambitions.

By Lord Aikins Adusei. The author is an Independent Energy and Security Analyst ([email protected])