ECG not entirely culpable for power sector woes — Report

Focussing solely on the Electricity Company of Ghana (ECG) for the sector's issues will be overlooking much deeper structural problems in the entire energy value chain.

While advocating private sector participation in the commercial operations of ECG, emphasis must also be placed on persistent technical and distribution losses of the company, including unregulated procurement expenditures, revenue underperformance and the mismatch between cedi-based collections and dollar-indexed obligations which cannot be resolved through technical interventions alone.

In addition, stagnant upstream oil and gas sector with no significant new investment in about eight years poses challenges to regular power supply.

These were contained in a report by International Perspective for Policy and Governance (IPPG), an energy think tank.

Titled; “Securing Ghana’s energy future: Policy actions for sustainability and efficiency,” the report presented a whole-system diagnosis of the country's energy sector and outlined urgent actions which needed to be prioritised by the government for reform.

The report was delivered at a boardroom meeting of experts on energy and stakeholders from civil society, academia, consulting, law and audit firms, as well as Independent Power Producers (IPPs).

“The challenges of the ECG are only the most visible layer of a complex, multi-point crisis draining public finances, undermining investments and threatening Ghana’s long-term development,” the report added.

Irregular gas supply

The report also highlighted persistent reliability challenges in domestic gas supply, particularly with the Ghana National Gas Company (GNGC), which it said, continued to deliver inconsistent and insufficiently processed gas for baseload power and industrial use.

It said the challenges were worsened by the country's dependence on gas imports through the West African Gas Pipeline (WAGP), which exposes it to supply disruptions caused by payment arrears, technical faults and upstream constraints.

It also highlighted the persistent failure of the government to apply sound business principles in energy planning and operations, an oversight that, it said, had worsened financial distress across the value chain and stated that despite policy commitments, the realisation of solar and wind power projects in particular has stalled.

It further highlighted the stalled implementation of renegotiated power purchase agreements with the IPPs, initiated under the previous administration adding that the renegotiation process was intended to realign contract terms with the fiscal realities of the country and reduce the unsustainable financial burden on the sector, among other challenges. 

Solution

The report called for immediate action from the government and the Ministry of Energy and Green Transition to address the challenges in a time-bound reform pathway.

It said revenue collection and operational discipline in ECG must be strengthened, while restoring confidence and reviving upstream oil and gas investments, as well as ensuring the implementation of a transparent cash waterfall mechanism to guarantee timely payments to IPPs.

In the medium-term, the report recommended that the government include a comprehensive policy to audit, streamline existing energy policies and clarify regulatory mandates.

“Efforts should also focus on strengthening monitoring, evaluation and institutional learning systems to prevent recurring policy cycles and avoid duplication of sector reforms,” the report added.