New power projects unlikely to end crisis

The Principal of Africa Power Systems Management Inc., (“APSM”), Mr Kweku A. Awotwi, says the country cannot bank its hopes on independent power projects to augment electricity generation capacity because they have inherent challenges that will not make the benefits realised within the period the country needed them most.

Mr Awotwi said each of the more than 40 projects that have received provisional licenses or siting permits, were demanding sovereign guarantees to enable them to move into construction and operation phase, which the government was unable and or, unwilling to provide.

“Unfortunately, this scenario is highly unlikely, despite the good intentions, for all manner of reasons. Most, if not all, these independent private projects are looking for some kind of sovereign guarantee to mitigate the variety of risks these investors see operating in Ghana,” he said.

He added “the Government is not willing, or able, to provide such guarantees, and, mind you, we are already under the watchful eyes of the International Monetary Fund (IMF) to keep our debts down.”

Mr Awotwi, who is a former Chief Executive Officer of the Volta River Authority (VRA), Ghana’s largest power producer, was speaking at the 11th West African Mining and Power Conference (WAMPOC) in Accra on the theme “Sustaining mining and power investments – meeting stakeholder expectations in a challenging global environment.” 

The conference was organised by Events and Projects International in collaboration with dmg events and was endorsed by the Ghana Chamber of Mines, the Ministry of Lands and Natural Resources, the Energy Commission and the Minerals Commission

Although he concedes that should all the projects be built and commissioned, they could immediately move the country’s generation capacity from the current 3,500 Megawatts (MW) to over 5,000 MW by 2018 and over 8,000 MW by 2020, he was skeptical that the blissful picture being painted of the power sector as a result of those investments was unlikely to happen.

The country’s estimated reserve margin of 20 per cent would be easily met, and there would be no load-shedding for the next 20 years.

Proliferation of licenses

He said there was a Committee of Experts evaluating and ranking all these various projects, and that a short list of “Emergency”, and then “Priority” Projects would be published in the next two  months, that will provide guidance in terms of which capacity will be built first, second, and third. 

“This is a much anticipated list, and will go far to clear the confusion and consternation in the independent power investment community. However, this initial proliferation of licenses to build capacity does point to a more troubling question: how did this happen in the first place? Aren’t there mandated institutions that have processes and procedures in place to determine such matters? And where is the coordination taking place to ensure stakeholder institutions are working together to achieve common goals?” he quizzed. 

He said people familiar with the electricity sector would have  heard of “Least Cost Generation Plans”, where a utility like the VRA puts out its 10‐year investment program after a careful evaluation of options, system considerations, appropriate technologies, and costs. 

While these might  no longer be as relevant in the newly deregulated environment , he said, people would like to understand the rules and processes by which new generation plants wouldl be determined and built.

He therefore advised that the mining community to put government and the sector regulators to articulate and lay out, much more transparent guidelines and processes guiding new investment decisions as soon as possible, and not a day, too soon.

“In the times as we have recently experienced them, every mining company worries about whether there is or will be enough power capacity in the system for the foreseeable future: the good news – if we want to call it that – is that we are moving from a period of not having enough power, to one where we may have too much,” he said. 

Sector rocked with debts

He said while the unavailability of fuel can be caused by force majeure events such as the severing of the West African Gas pipeline, or by the lack of rainfall, and below average  inflows into  the Volta lake, it is often more likely caused by man-made events, most usually, the lack of funds to pay our bills.

The VRA is currently indebted to the West Africa Gas Pipeline Company (WAGPCo), the pipeline company, and N-Gas, the suppliers of the gas from Nigeria, approximately US$180 million. 

“While the vandalism on the pipelines in Nigeria accounts, in great measure, to the low levels of gas in Nigeria as a whole, you don’t need to be a rocket scientist to figure out that the Nigerians have very little incentive to supply the contractually obligated levels to a customer who owes them so much money,” he explained.