Poor power deals to cost US$680m annually

18 May 2017

Poor power deals to cost US$680m annually

The country would have to pay about US$680 annually for excess power capacity if it goes ahead with all 43 Power Purchase Agreements (PPAs) signed with various companies by 2020, Energy Minister, Boakye Agyarko, has said.

“We have created numerous PPAs that have created potential over capacity. We have signed and discussed, as a country, about 43 power purchase agreements with various power producers, technically committing us to about 10, 800MW of power when in actual fact we need less than 5,000MW.

Potentially, we have an over capacity of about 5800MW. If we allow this situation to proceed, it means that the capacity charges that this country will have to pay will amount to some US$ 680m annually by 2020. That is capacity procured but unable to use,” the minister said at the National Policy Summit.

The power deals signed for and on behalf of the country have come under intense scrutiny for over a year.

Energy think-tank, Africa Centre for Energy Policy (ACEP), barely a week after 2016 general elections, demanded that the new government reviews all existing Power Purchase Agreements.

ACEP argues that it was imperative for government to pull out of some of the agreements since most of the companies have not yet secured funds for the projects even though they have expressed interest.

“All emergency power contracts that have failed to deliver on time would have to be canceled or renegotiated into a regular IPP to save cost. The high tariffs associated with the emergency plants are not appropriate for long-term economic planning and protection of industries,” the energy policy think-tank said.

The country’s electricity demand currently stands at about 2,225MW. This is growing by 10 percent per annum and is expected to hit 7,000MW by 2030.

However, fuel constraints -- crude oil, gas and water for hydro power generation -- have necessitated the need for exploring cost-effective, reliable, and clean power sources, which has made the government latch on to the ‘clean coal’ power idea.

Given the current gas demand of about 450Mscf per day, indigenous gas and limited supply from the West Africa Gas Pipeline are inadequate. Available indigenous gas is also expected to run out by 2036.

Liquefied Natural Gas (LNG) options are being explored to ensure the uninterrupted supply of gas for electricity generation.

Source: Business and Financial Times