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Renewables growth is an opportunity, not threat to ECG – IES

The growth of renewable energy in the country should be seen as an opportunity, not a threat to the viability and future growth of the Electricity Company of Ghana (ECG), the largest distributor of power, the Institute for Energy Security (IES) has said.

The IES believes that renewables such as solar and wind power, must rather be seen as presenting healthy competition to the traditional power systems or sources, and government must step-up its effort at increasing renewable energy in the country’s energy mix.

“Renewable energies are presenting themselves as a superior alternative to thermal power plants fuelled by hydrocarbons. Businesses seeing electricity cost as a key element in their operational cost will definitely advance toward the cheap energy sources. It must be in the interest of the government that industries have less electricity cost to bear.

“It is one sure way to guarantee moderate prices for goods and services in the country. Indeed, without cheaper electricity supply, economic transformation through improved productivity in manufacturing and services, and promotion of value-addition in resource-based economies would not be possible,” Nana Amoasi VII, Executive Director-IES, said in an interview with the B&FT.

Last week, the Director of Renewable and Nuclear Energy at the Ministry of Energy, Wisdom Ahiataku-Togobo, told the B&FT in an interview that the ministry is contemplating measures that need to be put in place to ensure a boom in solar and another renewable energy usage will not threaten the viability of the nation’s power distributor.

He noted that there are growing worries from energy sector players about the emergence of renewables which could threaten the financial sustainability of the ECG; but many analysts, including the IES, noted that such worries are unfounded since renewables are the present and future of energy.

Data from the International Renewable Energy Agency (IRENA) show that more than 50 percent of the renewable capacity added in 2019 achieved lower electricity costs than new coal. Solar photovoltaics (PV) reveals the sharpest cost decline over 2010-2019 at 82 percent, followed by concentrated solar power (CSP) at 47 percent, onshore wind at 40 percent, and offshore wind at 29 percent.

Globally, electricity costs from utility-scale solar PV dropped 13 percent year-on-year, reaching nearly 7 cents (US$0.068) per kilowatt-hour (kWh) in 2019. Onshore and offshore wind both fell about 9 percent year-on-year, reaching 5.3 cents and 11.5 cents per kilowatt-hour respectively for newly-commissioned projects.

To Nana Amoasi VII, with the growth of green energy – environmentally and economically justifiable – businesses will become less dependent on the grid as they migrate to renewables. Therefore, this is the best opportunity for the ECG to be operationally efficient.

He recommended that government and the ECG concern themselves with the high technical and commercial losses the power distributor has been incurring year after year.

“Those losses are the reason for which the ECG has been struggling to post profit over the past three years, and is struggling to meet its debt obligations. The poor cash collection from consumers has resulted in huge debts owed suppliers, power generators and the transmitter, Ghana Grid Company (GRIDCo),” he said.

For instance, the monthly cash payment analysis carried out by the IES for first-half of 2020 (HY1/2020) showed that the amount owed by the ECG to GRIDCo totalled close to GH¢451.468million. However, the ECG paid only GH¢188.198million – representing 41.69 percent of total invoices issued over the period.

“Aside from defaulting on its debt obligations, the illiquidity also makes it difficult for the power distributor to maintain its system, resulting in high technical losses. Adequate financial outlay is required to fix the inefficiencies in ECG’s distribution network due to the obsolete nature of some of the equipment in the system,” the statement noted.

Nana Amoasi VII stressed that the ECG’s financial viability is therefore threatened by these key factors. “The ECG stands a much better chance of being viable if only it can address the commercial and technical losses it has been battling with for years.”

Off-grid options required to meet 2025 target

The Executive Director of the energy think-tank explained that off-grid electricity supply is required to ensure that Ghana can meet its goal of universal electricity access by 2025; therefore, going the renewable route is the only way of achieving that target.

Over the last three years, the annual electricity access growth rate has seen a substantial decline – from 2.7 percent to a paltry 0.6 percent. As at the end of 2019, the country had obtained a national electricity access rate of 85 percent.

“Had the country maintained just the annual rate of roughly 2.7 percent or more, electricity access rate would have been somewhere around 95 percent by the close of the year; a rate that is comparable to other countries outside the sub-Saharan Africa and Asia band.

“The near-universal access was not to be, because a considerable proportion of communities awaiting connection to the national electricity grid are currently difficult to access due to the fact that they are lakeside communities, with others planted on islands that require connection by submarine cables. The ECG cannot conveniently provide power to such communities. Hence, it may take the deployment of renewable energies to achieve universal electricity access in the country.”

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