From Dum, through Dumsor to Dumkoraa: When Cholera attacks power generation
Energy is the convertible currency of modern development. This is because, energy facilitates production, transportation, communication and improved lifestyle. Most countries, including Ghana are making plans and policies that will enhance energy access and sustainable supply. Ghana has a great power generation and supply potential. Currently, Ghana has a generation capacity of 2840 MW with a peak demand estimated at 1900MW. This implies that Ghana has excess generation capacity of 940 MW. However, intermittent power supply has become a major problem for consumers, policy makers and businesses alike. Due to this energy inconsistent power supply, the World Bank estimates that the 2006 power crisis in Ghana led to a number of challenges for the economy:
- A loss in GDP by 1.8%;
- Reduction in employment levels due to reduced economic activity;
- Increased cost of production as a result of higher cost of electricity (Relying on more expensive generating sets).
The way forward
I believe political achievements in the power sector should now be limited to how long Ghanaians have continuously enjoyed electricity. There are two things we can do immediately!! First, we need to stop all the political promises on fixing the power problem and stop talking about how much generational capacity we have added. It is very irritating! Second, more than 60% of oil revenues to be received in 2015 and 2016, and 30% in 2017, 2018 and 2019 should be channelled to the power sector.
Funding the power sector from the proceeds of oil production: I believe that 70% of oil revenues accrue to the government in 2015 and 65% in 2017 should be dedicated to power generation, distributional efficiency and electricity access. This is because, the underlying factor for the promotion of economic enclaves, foreign direct investors and promotion of made in Ghana goods is consistent power supply. We therefore need to channel our oil revenues immediately to power generation. This can also help to boost production in the manufacturing sector, create employment and attract investors.
Investment in clean coal: Coal is one of the cheapest sources of fuel for power generation. However, coal is also one of the dirtiest. ?There are numerous technologies which reduce the impact of coal emissions on the environment. For instance, the Integrated Gasification Combined Cycle almost eliminates particulate emissions, carbon capture and storage and coal bed methane can all help reduce the impact of coal emissions on the environment. We will need guidelines from the EPA and other regulatory bodies to help in this direction.
Importing natural gas: Natural gas is not made in Nigeria. Nigeria is just one of the countries that produces natural gas. However, natural gas can be transported either through pipelines or as a Liquefied Natural Gas (LNG). Both of these means of transportation have their shortfalls. For instance, LNG requires higher initial investments as compared to pipelines however the cost of pipelines increases proportionally with distance whilst the cost of LNG rises slowly with distance. It is my believe that, LNG imports may be economically better and environmentally friendly alternative to the crude oil we use in our thermal plants. We can explore the LNG option now.? Again, local and foreign entrepreneurs can be supported to import LNG to supply the thermal plants. This arrangement should be guided by a legal framework.
Economic and Legal Incentives for production: ?Production subsidies and tax exemptions can be introduced at the supply side of the power production. This is because, though there calls for private sector participation in energy generation, due to huge initial capital requirements, most entrepreneurs find difficult to enter the industry. Further,
Consumer Efficiency– Credit rating of consumers in Ghana is very low. Consumers do not pay their electricity bills regularly. Most of the mining and timber companies as well as the industrial and commercial operators are always in huge arrears. They cannot be disconnected easily because of the PURC?s guidelines on disconnection which is more protective of the consumer. Another problem comes from consumers who are put on flat rates by the distribution companies due to frequent shortage of meters. Further, Most of the state-owned institutions such as the ministries, departments, hospitals, security services, schools and others get their bills paid from the consolidated fund and this takes months, if not years.
It is therefore suggested that electricity meters should be distributed nationwide and operationalised before the MCC II takes off. In addition, PURC should minimise the processes and guidelines on disconnection to help utility companies retrieve their investment. Further, monies for the payment of electricity bills of state institutions should be captured in the budget and set aside for prompt payment. Again, state institutions which are commercial viable state institutions can be wean-off to pay their own bill.
?Distributional losses/Operational efficiency performance: In the power sector, distributional and transmission losses refer to the amounts of electricity injected into the transmission and distribution grids that are not paid for by users. The losses can be technical (such as losses through transmission lines, power systems and measurement systems) or non- technical (including theft of electricity cables, errors in book-keeping, non-payment by customers). A major means of reducing losses, especially commercial losses is through metering and billing. Using the mobile phones as a possible payment device might be the best way to distribute prepaid vouchers. It is imperative to consider nonetheless, that although mobile phone use are growing, cash is quiet keen in a lot of informal markets where many people are without banks and lack access to internet connectivity and mobile banking. A probable solution to Africa?s electricity payment challenge is to enable informal vendors like taxi drivers, local shop owners and micro entrepreneur to use mobile technology to buy prepaid electricity vouchers, which they can eventually sell for cash. This would reproduce the success of mobile airtime distribution and enable electricity providers to ensure that even unbanked, unconnected people in the remotest of areas can access and pay for electricity connectively.
?Sector investment: Pursuant to its regulatory functions, the PURC uses its set guidelines to determine tariffs. In addition, an Automatic Adjustment Formula has been introduced to allow for quarterly revision of tariffs to reflect fluctuations in crude oil prices, foreign exchange rates, the hydrothermal generation mix and changes in the consumer price index. With this, major tariff reviews were to be done only every four years. This however has not been working as expected with the problem being government interference in the work of the PURC. Tariffs that are set never meet the expectations of the service providers. In most cases consumer interest (ability to pay) overrides economic considerations since the final tariff is decided by government through its approval process and not the PURC, as it appears to be. This has contributed to a large extent to the poor financial performance of the utilities. It is suggested that government interference in the setting of tariffs should be reduced/ stopped. PURC should be able to perform its functions independently.
?Cost based pricing model: The Cost-based pricing model enhances investment in the power sector since it allows investors to recoup cost of production and guarantees some level of profit. ?Under the cost-based pricing model, there assume to be a lack of incentive for cost reduction and efficiency since the consumer bears all the cost. If these issues are not addressed properly, it will lead to situations where customers who are billed for accurately measured consumption and regularly paying their bills will be subsidizing those users who do not pay for electricity consumption. Again, customers will be paying for the perceived inefficiencies of these companies.
Annual weather forecast: The expected rainfall patterns of a preceding year should be captured in the Ministry of Energy and Petroleum?s budget estimates. That is, we need to project how much rain we will have around the Volta River to plan for possible reduction in the water level of the Akosombo Dam. This will help to reduce the costly emergency power and load shedding plans that are often paid for by businesses and consumers.
Investments in waste to energy, solar and biogas: We can add all the ?DA?s? ie SADA, MADA, FADA, WADA, etc into a transparent, accountable and ?corruption proof? Energy Development Authority as a starting point for development. We will need energy to power industrialisations and achieve the aims of all these development authorities. We will give them a five year period and measurable objectives to invest in waste to energy production, connect all public offices and buildings to solar, promote private sector investor in the energy sector and identifiable renewable energy sources when Ghana can profitably maximise its potential. Without consistent power supply, all these development authorities will be reduced to Akonfem and tree planting.
I believe we have the potential, the ideas, the capacity and the resource to produce and export power. What we need is priority, seriousness and accountability. We should remember that though LNG may be expensive, it is cheaper than the cost of dumsor.
Power Sector Advisor, Africa Centre for Energy Policy (ACEP)