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Business news for Thursday, September 17, 2020
Source: www.ghanaweb.com
2020-09-17
Dr. Mohammed Amin Adam, Deputy Minister of Energy
Deputy Energy Minister Dr. Mohammed Amin Adam has expressed surprise at the promise of the National Democratic Congress (NDC) to increase power generation capacity when it was voted in the December elections.
Dr. Amin says that the country is already struggling with the problem of excess power capacity generated by the NDC, hence the need for methods to solve the problem.
“The NDC, our friends are making a new promise on capacity expansion. One of the main challenges in the energy sector right now is the problem of overcapacity, so I was hoping they would tell Ghanaians how they intend to tackle overcapacity; a problem that was actually created by them. “
Speaking on JoyNews’ PM Express, the minister said that the former NDC government’s quest to resolve dumsor led to it signing a series of power purchase agreements (PPAs) that required independent power producers to generate power for the country.
“They signed several power purchase agreements; at last count 42 power purchase agreements that require different power companies to install power plants to generate power ”
These, according to him, “were done without resorting to competitive bidding processes” and these PPAs have been implemented despite the fact that Ghana does not need as much power.
This has led to the production of approximately 5,000 megawatts (MW) of electricity, when the country consumes only 2,400 MW at its peak, leaving a surplus margin of more than 1,500 MW.
“And then you have almost 2,000 MW of generation capacity that is not needed. Even if you remove what we call reserve margin, the reserve margin by international standards should be between 20 and 25% of your total installed capacity. They are still going to have to carry almost 1000 to 1500 MW of power that is not needed, “he said.
The deputy energy minister added that the excess energy generated costs the country approximately half a trillion US dollars annually, although the country does not need it.
“It is not just power that is not needed, but power that we have to pay for, even if we do not need that power. Today what we have are excess capacity charges that Ghana has to pay. “
This predicament of paying excess capacity charges, he explained, is a result of the nature of the ‘take or pay’ PPA contracts that the NDC signed in an attempt to resolve the energy crisis.
The Minister further added that this cost had added to the profile of the country’s debt. Unfortunately, the government cannot charge excess capacity in tariffs, otherwise it will lead to a 300% increase in charges, so the government of Ghana has to find alternative ways to solve the problem.
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