Ghana’s power sector is drag on economy, as ECG expects $60m loss in 2013

The Ghanaian economy has been achieving sustained growth in excess of 6% annually, but the power sector has become a drag on the economy, as the Electricity Company of Ghana expects to lose $60 million in 2013.

A major, avoidable power crisis in 2006-7 is estimated to have cost the country nearly 1% GDP growth in those years, according to the World Bank

Five years later, Ghana is once again plunged into power shortages, which could have been avoided if lessons from the past had been learned, the Bank said.

The Bank today launched an energy sector report on Ghana in Accra – under the theme, “Energizing Economic Growth in Ghana: Making the power and petroleum sectors rise to the challenge.” The report also highlights the centrality of fixing the problems in the power sector as a path to ensuring that Ghana’s economic growth ambitions are not stymied by lack of electricity.

According to the report, “government must improve the Electricity Company of Ghana’s (ECG)’s technical and commercial performance. ECG is one of Ghana’s most important state-owned enterprises, with over 1.8 million customers, 5,600 staff and sales of about $800 million annually.”

It adds, “ECG plans to invest $190 million on average per year for 2012-15 to upgrade and expand its network. However, ECG cannot raise the necessary funds, because it is currently struggling financially. ECG realized a small loss in 2011 and a significantly higher loss in 2012 ($44 million), and it estimates an even higher loss 2013 ($60 million).”

The report indicates that, without actions to attract additional power generation, Ghana will be short of about 1,600 MW, because by 2022.

Ghana’s need for power generation (including a 20% reserve margin) is expected to increase to about 4,400 megawatts (MW), which is double its current generation capacity, the report noted.

Meanwhile, current investment plans from the Volta River Authority (VRA) and Independent Power Producers (IPPs) are projected to add only about 740 MW, it adds.

On the gas sector, the report notes that, ensuring an adequate and secure supply of natural gas is fundamental to improving the availability and cost of power in Ghana but a delay in the start-up of gas supply costs Ghana $1 million per day of additional oil purchases.

The report further recommends that, government should place a clear priority on satisfying the power sector demand for gas before considering supply to petrochemical projects. At a minimum, the government should wait tw0 to four years before irrevocably committing gas to petrochemicals, to allow time for resolving major near-term gas supply uncertainties.

“At an oil price of $100 per barrel, gross government revenues from oil and gas production are projected to grow from $542 million in 2012 to roughly $1.4 billion by 2016,” it says.

The Task Team leader for the report, Sunil Mathrani said, “The time has come to rally all stakeholders in Ghana’s energy sector together to find lasting solutions to these challenges. We have to act now to avoid more ‘dum sor dum sor’(incessant power cuts) in future.”

By Dorcas Appiah