The KarPower Ship has finally docked at the Tema Port from Turkey with optimism and fanfare. However, the barge which is expected to generate 225 megawatts will use heavy fuel oil (HFO) which is quite expensive.
Meanwhile, the second barge which has been retrofitted to generate about 400MW is expected to arrive in Ghana within the first quarter of 2016. The total generation capacity from the two barges will constitute 625MW to be added to the national grid.
The irony is that these floating power plants have to be fuelled with HFO, but as it stands now, the country appears not to have enough financial wherewithal to procure the fuel feed stock. Power generation economists have projected that the 225MW capacity barge will consume over 30,000 tonnes of HFO, with an estimated value of about $9 million monthly.
The agreed tariffs for the barge is 20 cent per kilowatt/hour, which is exorbitant as compared to the approved tariff of 13 cent per kilowatt/hour for existing thermal producers. This will automatically have cost implications in the generation mix which will be passed on to domestic and industrial consumers.
As envisaged by policy makers, the major problem with the barges will be the fuel source. Heavy crude oil that will be used to power the barges should be made available to achieve their full utilisations. Therefore, as part of the contractual agreements, GNPC has been made to give a fuel guarantee to the barges. It has already deposited a guarantee of 100 million dollars to an escrow account for this purpose.
This guarantee is aimed at addressing the fuel problem in the short to medium term basis. It will be interesting to see how competently this contractual obligation will be discharged when the barges start commercial operations in due course.
Paradoxically, these power plants may not be a solution to the perennial electricity crisis in Ghana, unless adequate financial engineering is carried out to improve revenue mobilisation, and fix realistic electricity tariffs at the downstream power sector.
This is imperative due to the shift of the generation mix in favour of thermal plants. Therefore, the fanfare that accompanied with the KarPower ship arrival on the 29th November, 2015 was understandable because at least it will add another 225MW towards resolving the power crisis, but cost implications need to be assessed quickly to ensure its smooth operations going forward.
Meanwhile, Africa and Middle East Resource Investment (AMERI) power units that have been moved to Aboadze power enclave will be adding 250MW to the National Electricity Grid, comprising ten units of generators with each one having the capacity of 25MW.
The recent acute electricity supply was as a result of its connectivity to the Ghana National Gas Company (GNGC) at Aboadze. This has compelled Ghana Gas Company to shut down completely for safety concerns. Fortunately, both technical and mechanical works have been completed and GNGC has begun its normal operations to Aboazde.
The country's generation capacity is currently about 2,900MW, peak demand is about 2,050MW and currently available capacity of 1,450MW. Hence, the generation deficit hovers around 400MW to 600MW depending on prevailing circumstances. This deficit has been responsible for the load shedding for almost four years which is unprecedented in the annals of Ghana. However, it seems there are glimmers of hope on the horizon for Ghanaians and industrial consumers.
The two barges and AMERI’s intervention alone can add up to 875MW as soon as possible to the national grid, which is almost close to the total generation capacity of Akosombo (1,020MW). Some power plants are also on-going, while others are in the pipeline. For instance, the Kpone Power Plant expansion Project is expected to inject 110MW into the national grid by December and its second stage will also add 110MW to the generation stock within the first quarter of 2016.
Similarly, Asogli Power Ghana Limited is working assiduously to increase its generation by 360MW in 2017. However, half of this is on course to be delivered in December, 2015. Tracking the progress of work by the Cen power Project reveals that it is also on course to deliver 350MW by the end of 2017. Also, coming on stream by the end of this year are the TICO Expansion (110MW) and Tema Thermal Plant Project (38MW). A huge power generation feat, by all standards, any single government has ever achieved in Ghana.
Sadly, supplies of lean gas from Nigeria Gas (G-Gas) and the Ghana National Gas Company (GNGC) have been erratic due to technical glitches and financial challenges. The Volta River Authority (VRA) owes N-Gas and GNGC $180 million and $150 million respectively as a result of several factors including low tariffs and poor revenue mobilization. Banks are also on the heels of the VRA to recover $1.3 billion debts which has accumulated over the years.
The power sector has therefore become highly indebted with frightening future prospects, unless adequate steps are taken to clean their balance sheets of the companies. Hence, fuelling of these thermal plants would remain a major challenge if these high levels of indebtedness are not systematically addressed as soon as practicable.
Energy Policy & Research Institute (EPRI) have already raised concerns in investing heavily into thermal power sources in the generation mix due to its cost implications and erratic gas supply to guarantee us reliable and affordable electricity supply in Ghana. Payment of realistic tariffs for electricity might be unpopular, but it is one of the prudent decisions to make.
The Public Utility and Regulation Commission (PURC) should therefore grant the request of the VRA, Ghana Grid Company (GRIDCo) and Electricity Company of Ghana (ECG) to avoid another unpleasant bout of load shedding in the near future.
Most inputs in the power sectors are imported overseas and priced in dollars. Therefore, managers of the country’s economy therefore have a huge responsibility to play in ameliorating the forex losses.
The spiral depreciation of the cedi over the years means any tariff hikes outlive their usefulness in the power sector. In this regard, the Economic Management Team, Ministry of Finance and Bank of Ghana must step up their game. The effective management of the currency would assist to sanitise the tariff regime, and subsequently cushion the bills paid by electricity consumers.
The aforementioned issues indicate that the moment the electricity crisis is fixed as promised by the president, an emerging obstacle that would be hotly discussed in the media is the payment of actual tariffs, to make generation companies have value for their investments.
Hence, if tariff increments are discussed dispassionately devoid of partisan connotations, it will strengthen balance sheets of the valued chain companies, enabling them to supply reliable and affordable electricity.
Alhaji Mustapha Iddrisu
Energy Policy Analyst
Energy Policy & Research Institute (EPRI)
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