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Ghana’s beleaguered energy sector needs fresh investments in hydroelectric dams and higher end-user tariffs if the now perennial supply hiccups are to be effectively curtailed, energy experts have said.

State-run electric energy producer, Volta River Authority (VRA), has disclosed that cost of generating power from thermal sources, which now constitute over 40 percent of total national generation capacity, is becoming increasingly unsustainable.

Erratic gas deliveries from Nigeria, through the West Africa Gas Pipeline, has compelled VRA to purchase significant quantities of expensive crude oil to generate power, with costs now exceeding US$2.5 million daily.

Coupled with payment arrears accruing from electricity supply to government ministries, departments and agencies (MDAs) and delay in honouring Government Promissory Notes arising out of oil purchases, which constitute a colossal amount both in foreign and local currencies, VRA’s investments in generation capacity have been hobbled.

VRA engineers explained to journalists, on a recent working tour of the utility provider’s plants across country, that electricity from hydro sources are the cheapest in the country, with total generation cost of GHC 0.045 per kilowatt hour (kWh) compared to thermal generation costs averaging GHC 0.350/kWh at 2010 estimates.

The VRA has identified several hydro sites with total generation potential of 1,237 megawatts (MW), which approximately equals current total output from the country’s only hydroelectric dams at Akosombo and Kpong.

Prefeasibility studies had been carried out, a couple of years ago, on a number of them, including the ongoing 400MW Bui project expected to produce first 130MW by end of April, 2013 and generate at full capacity by close of the year.

Initial capital outlay in the construction of hydro dams however far exceed that of thermal plants. Costs for the 400MW Bui dam, for instance, have exceeded US$650 million, while VRA’s ongoing 220MW Kpone Thermal Plant Project, expected to come on-stream by end of 2014, has a total estimated project cost of US$200 million, inclusive of 15 percent contingency and five percent project management costs.

The lower initial project costs, coupled with the faster project completion period of thermal plants, have led to increased investments in thermal plants both by independent power producers and by government with relatively little attention on the country’s hydro potential.

Government’s apparent lack of interest in the hydro dams may also stem from the misconception that the country has exhausted its major hydro sources with only prospects for mini-hydros.

The VRA list of potential hydro developments includes Hemang and Awisam on the Pra River with a potential of 93 MW and 50 MW respectively. Lanka, Ntereso and Koulbi on the Black Volta are 95, 64 and 68 MW respectively and Juale on the Oti River has 87 MW potential.

Following a debilitating power supply crunch in 2007, caused by severe drought leading to dangerously low levels of water in the Akosombo reservoir the country has seen a proliferation of gas and light crude oil fired thermal plants.

But power supply has currently been outstripped by ever-growing demand now at a rate of about 10 percent yearly.

High electricity demand is expected to be sustained over the foreseeable future as the country’s lower middle income economy pushes through to the upper rungs riding on the back of a burgeoning oil industry.

The VRA says the current electricity demand-supply imbalance is critical. Demand has outstripped supply while the system reserve margin is completely depleted with the rapid annual electricity demand growth largely being responsible for eroding the reserve margin.

The power producer notes that while electricity infrastructure projects are capital-intensive, which normally require huge capital outlay of not less than US$100 million, and take about four years to complete under ideal circumstances, the current pricing of electricity does not attract sufficient investment.

While government currently allows VRA to sell its unit of electric energy at four cents only, independent power producer, Sunon-Asogli Thermal Plant is allowed to charge about 11 cents for the same unit of power

The state-run utility’s operations are further hampered by government’s indebtedness to it.

Arrears accruing from electricity supply to government ministries, departments and agencies (MDAs) and delay in honouring Government Promissory Notes arising out of oil purchases constitute a colossal amount both in foreign and local currencies.
Source: Emmanuel Kwablah/Economic Tribune/Ghana

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