|Meeting Ghana's Energy Needs - Current Status And Preparations For The Future - A Speech By Mr Goosie Tanoh As Guest Speaker At The 3rd Ghana Policy Fair Dialogue Series|
|Wednesday, 18 April 2012 14:16|
Ghana has been hailed as "The Gateway to Africa." Over the past decade alone, we have witnessed the burgeoning growth of some very important industries. Our communications network is now one of the best and most affordable in Africa. Our roads and transport system, although still work is in progress, has seen some massive expansion in recent times. Even the educational sector has enjoyed some much needed boosts lately and is churning out more skilled manpower than ever before.
There is however, one major area in which this country has been slow to achieve the desired growth. Sadly, this is also one of the most fundamental catalysts to any country's rapid industrialization and subsequent development. I speak of course, about Ghana's Energy Sector with particular reference to electrical power generation, transportation and distribution.
In 2005, a report was published by the Resource Center for Energy, Economics and Regulation (RCEER) which is based at the Institute of Statistical, Social and Economic Research (ISSER), University of Ghana, Legon. It was revealed in this report that the per capita electricity consumption of the average Ghanaian was about 358 kilowatt hours.
Rudimentary mathematics and unit conversions suggest that the average Ghanaian commands only 99.44watts of electricity. Just 0.66 watts shy of the power required to turn on a 100watt light bulb.
To put these figures into perspective, home appliances like refrigerators, blenders or hair dryers require about 500 watts of power each. Heaters and air conditioners need over 3,000 watts of electricity to function properly. To add even more perspective to these figures, the estimated per capita electricity consumption in Zimbabwe is 206 watts. That of Egypt is 211 watts. South Africa records about 721 watts per capita, 2100watts in the USA, and the average person in Belgium enjoys over 2,200 watts of electricity. Yet, according to pure empirical data, the average Ghanaian, that is you and I, is entitled to 99.44 watts only! Just about the power of an old light bulb.
Today, Energy or Power is almost synonymous with Electricity. Almost all forms of advanced machinery, tools and entire industries rely on electric power. Electricity's extraordinary versatility as a means of providing energy, means it can be put to an almost limitless set of applications; from transport to lighting, communications to computing. Electrical power is undoubtedly the backbone of modern industrial society, and it is expected to remain so for the foreseeable future.
There are three main historical periods of electricity in Ghana. The first, "Before Akosombo", refers to the period before the construction of the Akosombo Hydroelectric Power Plant in 1966.
The Second, called the "Hydro Years", is the period from 1966 to the mid eighties. This period is known for the development and expansion of the Akosombo Hydroelectric Plant in 1972 and the construction of the Kpong hydroelectric plant in 1982. By 1972, The Volta River Authority (VRA) had commenced supply of electricity to neighbouring Togo and Benin. This Second Historical Period is also known for experiencing the most severe drought in the recorded history of the Volta Basin, which occurred between 1982 and 1984. During this drought, total inflow into the Akosombo reservoir was less than 15 percent of the long-term expected total. Electricity supply was consequently rationed, supply to the country's major electricity consumer, the Volta Aluminum Company (VALCO) was completely truncated, and export supplies to Togo and Benin were reduced.
The Third Period, known as "Thermal Complementation", from the mid-eighties to date, is characterized by efforts to expand power generation through the implementation of the Takoradi Thermal Power Plant as well as the development and utilization of the West African Gas Pipeline. This is a period of securing reliable and economic fuel sources for power generation. In 1983, following the drought, VRA as part of its Generation and Transmission planning process undertook a comprehensive expansion study called the "Ghana Generation Planning Study (GGPS)". This study, completed in 1985, confirmed the need for a thermal plant to provide a reliable complementation to the hydro-generating resources at Kpong and Akosombo. A major consideration for complementing the hydro sources was the natural characteristic of the Volta River to have highly invariable flows from year to year. Of course, as a major river in a tropical part of the world, these variations in inflow were to be expected. Ultimately, this Third Thermal Complementation Period was to provide Ghana with insurance policies against poor hydrological years.
Several decades later in the Twenty-first Century, Ghana still relies heavily on hydroelectric power. This constitutes an imposing 80 percent of total installed capacity. Thermal power sources roughly account for the rest. Ghana's energy challenge is manifested in her expanding economy and growing population. Ghana's population was 18.9 million in 2000 and is projected to reach about 25 million according to the Ghana Statistical Survey Population and Housing Census conducted two years ago. Our population is expected to increase to 29 million in 2015, the target year for the Millennium Development Goals.
In recognition of the need to spur economic growth and reduce poverty, the government, through the Ministry of Energy in January 2009, set objectives of increasing power generation capacity from 1,810 megawatts (MW) to 5,000 MW by 2015, and also make electricity accessible to every part of the country by 2020. In order to meet these goals, the Ministry set to work enhancing the generation, transmission and distribution of electricity throughout the country. As of December 2010, Ghana's generation capacity as recorded by the Energy commission was 1865 Megawatts. Even this significant step up has not been enough to cater for the country's vast energy needs. Currently, the Volta Aluminum Company Limited lies woefully under-powered with just one pot-line operating. Major steel mills in Tema also operate at drastically low power levels. It is an established fact that Ghana's industries need far more power than we currently have planned for. And not only is this power needed in quantum, but in constant regularity.
An exceedingly vital piece of the power puzzle is not only the ability to generate power but to transport and distribute it efficiently.
In recognition of this the Ghana Grid Company (GRIDCo) became operational in 2008. The main purpose of GRIDCo was to undertake economic dispatch and transmission of electricity from wholesale suppliers (electricity-generating companies), to bulk customers which include the Electricity Company of Ghana, the Northern Electricity Department, and the mines. GRIDCo was also tasked with providing fair and non-discriminatory transmission services to all power market participants, acquire assets required to transmit electricity, provide billing services to bulk customers, and implement necessary investments required to reliably transmit electricity. GRIDCo was essentially placed in charge of managing the Wholesale Power Market.
The Electricity Company of Ghana, is the final retailer of electricity to the average Ghanaian consumer. Allegedly, about 15 percent of the power the ECG receives from the VRA is presumably lost through what is termed, "line losses". This is the slight decay resulting from the transmission of electricity across power lines. These losses occur due to the conversion of electricity into heat and electromagnetic energy. Even the most efficiently engineered transmission systems experience these losses, albeit at a significantly reduced rate than reported in Ghana's case. Reports also suggest that another 15 percent of electricity generated is lost through Non-revenue off-take, or what is more commonly known as "illegal connections". The sheer size of the ECG may well be its greatest disadvantage in detecting and managing these incidents.
Over the years, Ghana's distribution sector has not enjoyed the vast amounts of investment needed to keep it properly functional. Make no mistake, though, there have been some significant investment geared towards the distribution systems, however, long periods of neglect and some mismanagement, have taken their toll on the aged and often obsolete energy distribution assets.
It is estimated that no more than 20 percent, and in some countries as little as 5 percent, of the population in Africa (excluding South Africa and Egypt) have direct access to electricity. This figure falls to 2 percent in rural areas. Demand is expected to grow by about 5 percent annually over the next 20 years. It is critical, experts say, for Africa to build facilities to provide power to those lacking it, especially in the rural areas where the majority of Africans live. Infrastructural development is not merely about erecting giant structures, but also providing vital services, such as power, to increase commerce, business productivity and enhance the lives of poor families by giving them affordable energy for cooking, lighting, and entertainment.
POOR RURAL ELECTRIFICATION
Rural electrification however, raises a number of issues for most African governments. Many rural communities in Ghana have low population densities and are situated in remote locations. Connecting them to the national grid can be costly and often impractical. Alternatives include wind power, solar power and small diesel or petrol generators. All these plans call for massive capital investment, both local and foreign. It can be difficult for a sub-Saharan government to come up with the necessary funding on their own. Experts agree that private capital is needed.
This has significant implications for the rate of economic development. While the use of electricity for domestic purposes (e.g., lighting, radio, television, ironing) will normally lead to improvement only in the lives of consuming individuals, productive use of electricity by industries (all other things being equal), should lead to general macroeconomic improvement and a rise in the standard of living of the populace. The major consideration for Ghana is the ability of the country to match the rate of electricity demand with adequate supply, as well as the proportion of energy produced for productive use. It is estimated that about 50 percent of electricity produced in Ghana is consumed by domestic users. If this proportionate use can be altered in favour of industrial and/or productive use, then Ghana stands to gain.
A real example of this scenario is the situation with the Volta Aluminum Company (VALCO). VALCO needs 37SMW of electricity to run ailS potlines. Each potline is capable of producing 40,000 metric tons of aluminum metal. Together, all five potlines can produce about 200,000 metric tons of aluminum per annum. With aluminum currently selling for about $2,300 a ton on the world market, VALCO can potentially generate over $460 million a year in revenues for the Ghanaian economy almost at par with revenues from all Oil. It is easy, therefore, to see the immediate financial gains Ghana can enjoy from a fully powered VALCO. Currently VALCO receives 75MW of electricity, which is good to power only one potline.
Many of the problems plaguing the energy sector are not unique to this country alone. In fact, on more than one occasion, Ghana and other sub-Saharan countries like Nigeria, Togo, and Benin, have sought to collaborate and tackle some of the power issues that cut across borders. As far back as the early eighties, the West African Gas Pipeline seemed like a very viable project to transport natural gas from Nigeria to power Ghana, Togo, and Benin. Over two decades later, the project is fraught with disruptions and setbacks. In recent years, inconsistent deliveries and shortages have affected the ability of the VRA to effectively deliver power to the nation. This has sometimes been attributed to moisture-laden gas from the reserves in Nigeria, to vandalism, among other technical obstacles such as compression which thankfully have been resolved. The Nigerian government has also frequently been under intense pressure to concentrate much of the pipeline's gas supply into meeting its own explosive energy demands.
The prospect of the West African Gas Pipeline have also contributed to promoting high demand for Natural Gas among industries in the Tema area. Because of the promise of gas from WAPL, many Independent Power Producers and other industries dependant on gas were developed in this period. The less than optimum performance of WAPL has resulted in a real fuel crisis for these plants and industries in Tema.
The Bulk Oil Storage and Transport (BOST) was appointed as "Aggregator" to provide the infrastructure and acquire gas for supply to end-users. In addition, BOST conducted a review of Gas Demand for power plants and industries in Tema from work conducted by Nexant, Energy Commission and GECAD. This study predicts that the total natural gas demand from major power plants and industries nationwide would reach about 605.3MMscfd by 2013. The corresponding total supply of natural gas, as predicted by this period, would be about 200MMscfd. Leaving a demand- supply gap as wide as 405.3MMscfd. As the demand for gas is expected to continuously grow rapidly, BOST has been considering other sources of supply apart from the WAGP deliveries. The additional sources include Compressed Natural Gas deliveries from reserves discovered in Ghana or sourcing Liquefied Natural Gas from external sources to feed the growing demand.
While many potential uses have been identified and project economics justified, sadly no Local Distribution/Transmission Company (LDC}-has been formed. Infrastructure has also not been put in place which would allow a secondary market to function with any degree of smoothness. Most importantly, no specific customers have, to date, contracted for the gas nor suppliers committed to supply gas for domestic consumers beyond VRA. In the immediate and medium term future, the gap in the supply of gas means that with unfulfilled demand for WAGP compressed gas and Jubilee gas production only recently started, it is urgent that we set up and capitalize on BOST Gas and BOST Transco to immediately install the necessary infrastructure to make gas available to Ghanaian IPPs and industries if not in the original role of first tier transporter certainly in the combined role of Bulk Off taker and transporter to its retail customers particularly in the Tema Gas Franchise Enclave.
Perhaps no aspect of business is more affected by our current shortage of natural gas, than the Independent Power Producers (IPPs). Unlike governments, these private entities usually cannot afford to compensate for the lack of natural gas with Crude oil or Diesel. Doing so, may not prove favorable for their bottom line if they cannot pass on fully their fuel costs to the consumer by way of increased tariffs.
In spite of the rapid urban growth that Africa has experienced over the last 20 years, the majority of Africans still reside in rural areas. Although this distribution is likely to change in the not- too-distant future, rural Africa continues to be home to majority of Africans. This is particularly true of Sub-Saharan Africa. The United Nations Development Program estimates that more than 68 percent of inhabitants of Sub Saharan Africa reside in rural areas. Provision of modern energy services to this large segment of Africa's population is therefore of paramount importance. Ghana is no exception. About 90 percent of rural Ghana still relies on traditional fuels for cooking and heating purposes. There are many negative environmental and health impacts associated with such conditions. The decisive solutions to this problem may well lie in some large scale advanced electricity transmission projects, far off in the future.
Fortunately, there is a solution for the rural inhabitants of this country. In fact, many African nations like South Africa, Nigeria, Senegal and Algeria, have already recognized the benefits of this commodity and invested heavily in the required infrastructure. The gas itself, technically referred to as butane or propane, is mainly refined from conventional crude oil or natural gas. It is however more commonly known as Liquefied Petroleum Gas, or LPG.
LPG has an increasingly important role to play in Ghana by providing a safe, affordable, convenient and cleaner fuel for our rural communities. It is estimated that each average rural household burns up about 200 kilograms of firewood every year. Multiply that figure by 10 households, and suddenly, over 2 tons worth of firewood is needed just to fuel 10 households in a rural town, every single year. This clearly does not bode well for Ghana's already declining forests.
Unlike wood, LPG heat can be finely adjusted to reduce waste, it burns reasonably cleanly without any smoke, it is easy to use, and above all, if the equipment and LPG cylinders are maintained properly, it is very safe. Ghana clearly needs to pursue LPG as a fuel source for our rural communities. Special regulatory frameworks and policies need to be implemented, which will boost the assimilation of LPG into rural living. This situation also opens up a great opportunity for the private sector, particularly micro, small and medium enterprises (MSMEs), to enter the energy services market and to contribute towards effecting significant improvements in the energy services landscape of rural Ghana.
It has been declared that the oil from the Jubilee Field is of light quality and has high gas content. For every 1,000 barrels of oil that is produced, there is an associated gas output of about a million standard cubic feet. The Ghanaian government is therefore embarking on a zero-gas-flaring policy in order to fully utilize the associated gas output of the Jubilee fields. The anticipated utilization of natural gas includes; as a fuel source for Thermal power generation, as well as raw material for the petrochemical industry. Natural gas may also be used in the manufacture of ammonia for fertilizer production. This combined oil and gas yield from Jubilee could go a long way in powering Ghana's industries, providing employment for the populace, and even enhancing the agricultural sector. Careful management is what the Jubilee Fields need in unlocking the immense potential, not only in the energy sector, but throughout Ghana's economy.
It is very easy to see how Ghana's Thermal expansion projects and the WAGP would have been synchronized with each other: as our Thermal Plants were upgraded and expanded, the West African Gas Pipeline would provide clean, affordable natural gas from Nigeria, to power these plants. Non-hydro generated electricity would have soared to very productive levels, and provided that much-needed insurance policy to support the unsteady Akosombo and Kpone dams.
Presently, the ambitious Thermal Expansion projects can only be said to be halfway complete. There have been significant expansions to Thermal energy infrastructure, but the intended cheaper fuel source has yet to be established. The WAGP, although completed has not lived up to its potential as a reliable source of natural gas. Ghana, in a bid to compensate, has resorted to the use of Light Crude oil as fuel for our Thermal Power plants. Currently, about 90 percent of Thermal power is fuelled by light crude oil. This is considerably much more expensive, not to mention highly impractical to sustain, - as compared to natural gas from a fully functional West African Gas Pipeline. The nations involved in the implementation of the Pipeline, must accelerate progress on addressing the bureaucratic, technical and political issues that plague the West African
It is worth taking note that the gas from the Jubilee Oil Fields have been spoken for and will be dedicated to fertilizer production plants, and the VRA power plant in the Western region of Ghana. This leaves the entire Eastern sector of Ghana, with all its thriving industry, without power solutions in the near future.
Industries in places like Tema will have to find reliable and affordable natural gas feed stock for power generation and other industrial applications elsewhere in the short to medium term and even beyond. The very possible answer to that lies in a revolutionary technology that has surfaced in the past decade - the use of the Floating Storage and Regasification Units, or "FSRU".
The FSRU is originally a Liquefied Natural Gas transport vessel that has been refitted with capability to not only transport liquefied gas, but to also convert it back into its gaseous state, before dispatching into the local distribution system. If correctly deployed, the operations of the FSRU will make available, impressive volumes of natural gas. Furthermore, as an off-shore plant, the FSRU can be moored and moved around to meet shifting demand so long as the infrastructure exists. The FSRU in the immediate future can adequately meet the fuel deficits of the country and act as a part of the base load while we wait for the WAGP, Jubilee Fields and the country's other gas deposits to yield the expected results.
The Electricity Company of Ghana (ECG) - the entity charged with distributing electricity to Ghanaians - for decades, has been under intense pressure, to transmit power to all parts of the country. Illegal connections, undesirable line losses, and muddled revenue-collection systems have severely held back the company's abilities to fulfill its purpose. Perhaps the time has come for the ECG to decentralize its processes. The company could be broken up into smaller semi-autonomous regional divisions which would handle the transmission and distribution of electricity in their respective regions. Maybe even the district assemblies could be empowered and equipped to distribute power as a source of revenue. The present ECG, as we know it today, could remain the mother entity which would receive royalties from its offspring companies and oversee their activities. Along with stringent reform policies for the present ECG, decentralization in this form will greatly improve the country's electricity delivery system.
The erratic development of our towns requires that the institutions responsible for the transmission and distribution of electricity have adequate information and logistic capabilities to resolve power delivery problems. The ECG, as a single colossal juggernaut, may find it slightly difficult covering all bases and is very unlikely to know about Kofi in Nadoli who has illegally connected his house to ECG's power lines. On the other hand, let's say that small-but-specialized Entity-A distributes power in Nadoli and environs; just how long do you think it will take Entity-A to track down Kofi's illegal off-take?
Other African countries such as Nigeria are making gradual progress towards the decentralization of major government entities.
Unfortunately, there are certain non-technical barriers that hinder the rapid and widespread adoption of new renewable sources of energy such as the wind turbine, or Photovoltaic solar panels. Current energy markets, institutions, and policies have been developed to support the production and use of fossil fuels. Consumers also sometimes ignore renewable power systems because they are not given accurate price signals about electricity consumption. Intentional market distortions such as subsidies, and unintentional market distortions such as split incentives, may work against renewables. Experts have argued that some of the most surreptitious, yet powerful impediments facing renewable energy and energy efficiency in Africa, are more about culture and institutions than engineering and science.
There is often significant difficulty in overcoming established energy systems. National grids are usually tailored towards the operation of centralized power plants, and thus favour their performance. Technologies that do not easily fit into these networks may struggle to enter the market, even if the technology itself is commercially viable. This specially applies to distributed generation as most grids are not suited to receive electricity from many small sources. Large-scale renewables may also encounter problems if they are sited in areas far from existing grids. Furthermore, significantly higher capital cost of renewable energy technologies as compared with conventional energy is a major obstacle to renewable energy development. The inadequate financing options for renewable energy projects, including insufficient access to affordable financing for project developers, entrepreneurs and consumers are also important factors keeping the industry from growing.
Moving towards energy sustainability will require changes not only in the way energy is supplied, but in the way it is used, and reducing the amount of energy required to deliver various goods or services is essential. Opportunities for improvement on the demand side of the energy equation are as rich and diverse as those on the supply side, and often offer significant 'economic benefits. A sustainable energy economy requires commitments to both renewables and efficiency. Renewable energy and energy efficiency are said to be the "twin pillars" of sustainable energy policy. Efficiency is essential to slowing the energy demand growth so that rising clean energy supplies can make deep cuts in fossil fuel use. If energy use grows too fast, renewable energy development will chase a receding target.
There are many ambitious and promising prospects when it comes to righting the ship that is the Ghanaian Energy Sector. Some may not yield results in the short-term or even in our lifetimes. Others may require huge amounts of resources to implement. A policy review here or there may help the cause in a small way, who knows? Sacrifices will have to be made.
Ghana is working hard to fortify its energy industry in the next 10 years. As per the population census carried out in the year 2000, the number of households connected to the national electricity grid was 43 percent. This access rate was improved from 43 per cent at the end of 2000, to 54 percent at the end of 2008; indicating an 11 percent increase in eight years. The current access rate based on preliminary data indicates that the access rate has moved from 54 percent to 72 percent, constituting an 18 percent increase in two years. Meanwhile the surplus from the target of 5,000 megawatts by 2015 is intended to make Ghana an exporter of power in the sub-region through the West African Power Pool. Ghana is tried and tested in power exportation, having exported to Togo, Benin, Burkina Faso and La Cote d' Ivoire on several occasions. With increases in
To effectively tackle the problems that plague our energy sector, we need to clearly outline them and develop realistic, systematic, approaches that will solve these problems once and for all.
Energy delivery, one of our biggest challenges, is still fraught with disruption. Perhaps some entities charged with electricity delivery could be slightly streamlined and restructured to improve their efficiency and eliminate unproductive bureaucracies.
We have been slow to implement policies which should serve as catalysts to the growth of the energy sector and usher in better and more consistent forms of renewable energy.
The level and quality of infrastructure in this country need to be improved. Infrastructure should not mean only massive structures, skyscrapers or monuments, but the other important aspects also: transportation, communication, education.
The hardware and assets involved in electric power generation and distribution require periodic maintenance procedures which should never be ignored or taken lightly. Better management practices also need to be enforced in the operation and protection of the nation's energy production and distribution assets.
While we seek to prioritize and develop Ghana's national interests, we should always keep a watchful over the rest of the world. There are countries that have been through similar predicaments as Ghana is facing now. There are nations who found better, smarter ways of totally avoiding the kind of issues we face now. These places may be as far away as Asia or the Americas, but there are always lessons that can be learned from abroad. A typical example is the city of Dubai.
Oil was discovered in Dubai in1966. The resulting oil economy quickly expanded the city by 300 percent. Although wealthier than it had ever been, the government of Dubai recognized the important fact that their oil reserves were not infinite and to base the entire economy on the oil trade would be suicide in the long term. Forty years on, the government has successfully developed advanced self-sufficient tourism and services industries and as of 2006, the Dubai Financial Market's trading volume stood at about 400 billion shares; worth over $95 billion in total.
Granted, Dubai may have faced slightly different conditions than Ghana faces today, but it is living testament to what farsightedness and the will to implement a national vision can achieve - even in the middle of a Forty-Two Degrees Celsius desert!