Ghana Power Sector Report 2011
Ghana's electricity sector is undergoing a period of change with a spurt of new power projects that will raise total installed generation capacity in the country by 65% to a total of 3,600 MW by 2013. The increase in supply is timely with power generation reserve capacity in the country falling to critical levels in recent years despite the shutdown of 450 MW demand at the Volta Aluminium Company (VALCO).
Demand for electricity has fast outpaced new investments in power generation capacity over the past decade to reach a peak power demand of 9,131 GWh in 2010. From 2000 to 2009, residential demand has risen by 61% driven by rapid urbanization and high economic growth. 52% of the population now live in cities (up from 42% in 2000) and their incomes have increased as a result of economic growth averaging 5% annually. At the same time, industrial demand has also grown by 64% on the back of the strength of the gold mining sector. Ghana is the second largest gold producer in Africa and with gold prices at an all-time high, the energy-intensive sector now accounts for 12.5% of total electricity consumption.
The government of Ghana (GOG) has slowly pursued a program of power sector reform that is finally yielding dividends today in the form of new private sector investments. It created an independent regulatory agency, the Public Utilities Regulatory Commission (PURC) in 1997 to set tariffs, policies and promote competition in the sector. Since then, the PURC has held five tariff reviews which have set prices to reflect the real costs of production and to also provide a reasonable rate of return for market participants. The GOG has also created the Ghana Grid Company to provide fair and open access to the transmission grid and this has provided a clear legal and commercial basis for private sector power generation. As a result, half of all the new power projects are being built by independent power producers (IPP) raising their share from 19% in 2000 to 31% of total power generation capacity in the country by 2013.
The GOG has taken a deliberate decision to diversify the power sector away from a total reliance on hydroelectric power towards thermal fuel sources. The hydroelectric power plants at Akosombo and Kpong which for long have been the main source of power generation in the country, are susceptible to seasonal variations in water levels that have created periods of severe electricity crises such as the ones the country experienced in 1983, 1993, 1998-1999 and 2006-2007. Consequently, since 1997, the state-owned Volta River Authority (VRA) has built a number of diesel and crude oil-fired thermal plants to meet peak power demand and to provide backup in the event of occasional shortfalls in hydroelectric power.
Thermal power generation has proven to be expensive in Ghana with the high price of crude oil on world markets and the country has invested in the West African Gas Pipeline (WAGP) to supply power plants in the country with cheap natural gas from Nigerian oil fields. This has further accelerated the trend towards building gas-fired thermal plants and by 2013, thermal power plants will, for the first time, supersede hydroelectric power and account for 66% of total installed power generation capacity in the country.
However, many of Ghana’s new thermal power plants will face uncertain gas supply conditions when they are finally switched on. Militants in the Nigerian Delta have on several occasions attacked the WAGP’s main supply artery (the Escravos-Lagos Pipeline) and disrupted gas flows. In addition, increased Nigerian domestic demand has limited WAGP supply to Ghana to an amount that will barely generate 36% of its thermal power plant fuel requirements in 2013. To supplement possible shortfalls from WAGP, the GOG has made plans to build gas infrastructure to tap gas from the newly discovered Jubilee offshore oil field but this will only be ready in 2012 at the earliest.
Despite this, fast growth is expected in the years ahead for the Ghanaian electricity sector. Commercial production of oil is expected to boost growth in the country significantly with electricity consumption forecast to rise by 26% between 2011 and 2015 to a total of 13,169 GWh. At current tariff rates, total industry revenues are forecast to grow to $2.05 billion by 2015.
Demand for electricity has fast outpaced new investments in power generation capacity over the past decade to reach a peak power demand of 9,131 GWh in 2010. From 2000 to 2009, residential demand has risen by 61% driven by rapid urbanization and high economic growth. 52% of the population now live in cities (up from 42% in 2000) and their incomes have increased as a result of economic growth averaging 5% annually. At the same time, industrial demand has also grown by 64% on the back of the strength of the gold mining sector. Ghana is the second largest gold producer in Africa and with gold prices at an all-time high, the energy-intensive sector now accounts for 12.5% of total electricity consumption.
The government of Ghana (GOG) has slowly pursued a program of power sector reform that is finally yielding dividends today in the form of new private sector investments. It created an independent regulatory agency, the Public Utilities Regulatory Commission (PURC) in 1997 to set tariffs, policies and promote competition in the sector. Since then, the PURC has held five tariff reviews which have set prices to reflect the real costs of production and to also provide a reasonable rate of return for market participants. The GOG has also created the Ghana Grid Company to provide fair and open access to the transmission grid and this has provided a clear legal and commercial basis for private sector power generation. As a result, half of all the new power projects are being built by independent power producers (IPP) raising their share from 19% in 2000 to 31% of total power generation capacity in the country by 2013.
The GOG has taken a deliberate decision to diversify the power sector away from a total reliance on hydroelectric power towards thermal fuel sources. The hydroelectric power plants at Akosombo and Kpong which for long have been the main source of power generation in the country, are susceptible to seasonal variations in water levels that have created periods of severe electricity crises such as the ones the country experienced in 1983, 1993, 1998-1999 and 2006-2007. Consequently, since 1997, the state-owned Volta River Authority (VRA) has built a number of diesel and crude oil-fired thermal plants to meet peak power demand and to provide backup in the event of occasional shortfalls in hydroelectric power.
Thermal power generation has proven to be expensive in Ghana with the high price of crude oil on world markets and the country has invested in the West African Gas Pipeline (WAGP) to supply power plants in the country with cheap natural gas from Nigerian oil fields. This has further accelerated the trend towards building gas-fired thermal plants and by 2013, thermal power plants will, for the first time, supersede hydroelectric power and account for 66% of total installed power generation capacity in the country.
However, many of Ghana’s new thermal power plants will face uncertain gas supply conditions when they are finally switched on. Militants in the Nigerian Delta have on several occasions attacked the WAGP’s main supply artery (the Escravos-Lagos Pipeline) and disrupted gas flows. In addition, increased Nigerian domestic demand has limited WAGP supply to Ghana to an amount that will barely generate 36% of its thermal power plant fuel requirements in 2013. To supplement possible shortfalls from WAGP, the GOG has made plans to build gas infrastructure to tap gas from the newly discovered Jubilee offshore oil field but this will only be ready in 2012 at the earliest.
Despite this, fast growth is expected in the years ahead for the Ghanaian electricity sector. Commercial production of oil is expected to boost growth in the country significantly with electricity consumption forecast to rise by 26% between 2011 and 2015 to a total of 13,169 GWh. At current tariff rates, total industry revenues are forecast to grow to $2.05 billion by 2015.
Executive Summary
1. INDUSTRY OVERVIEW
1.1 Historical Background
1.2 Electricity Consumption
1.3 Electricity Supply
1.4 Electricity Imports & Exports
1.5 Electricity Tariffs
2. REGULATION & POLICIES
2.1 Regulatory Overview
2.2 Tariff Policies
2.3 National Electrification Scheme (NES)
3. PROFILE OF KEY PARTICIPANTS
3.1 Volta River Authority (VRA)
3.2 Independent Power Producers (IPP)
3.3 Ghana Grid Company (GRIDCo)
3.4 Electricity Company of Ghana (ECG)
3.5 Northern Electricity Department (NED)
4. INDUSTRY RISKS & CHALLENGES
4.1 High Crude Oil Import Prices
4.2 Gas Supply Constraints
5. KEY TRENDS & FORECASTS – 2011 - 2015
5.1 Construction of New Power Plants
5.2 West African Power Pool
5.3 Higher Metal Prices Raise Industrial Power Demand
1. INDUSTRY OVERVIEW
1.1 Historical Background
1.2 Electricity Consumption
1.3 Electricity Supply
1.4 Electricity Imports & Exports
1.5 Electricity Tariffs
2. REGULATION & POLICIES
2.1 Regulatory Overview
2.2 Tariff Policies
2.3 National Electrification Scheme (NES)
3. PROFILE OF KEY PARTICIPANTS
3.1 Volta River Authority (VRA)
3.2 Independent Power Producers (IPP)
3.3 Ghana Grid Company (GRIDCo)
3.4 Electricity Company of Ghana (ECG)
3.5 Northern Electricity Department (NED)
4. INDUSTRY RISKS & CHALLENGES
4.1 High Crude Oil Import Prices
4.2 Gas Supply Constraints
5. KEY TRENDS & FORECASTS – 2011 - 2015
5.1 Construction of New Power Plants
5.2 West African Power Pool
5.3 Higher Metal Prices Raise Industrial Power Demand
