The country’s attempt to export power to its neighbouring countries will suffer a major setback if tariff differentials between independent power producers (IPPs) signed in Ghana and those in the export destinations in the sub-region are not addressed, the World Bank Country Director, Mr Henry Kerali, has observed.
Despite an anticipated excess supply of about one-and-a-half gigawatts of electricity in the next four years, Mr Kerali said the high cost of kilowatt per hour in the country relative to those in the sub-region meant that power deficit countries in West Africa would struggle to patronise power from Ghana.
The result can end the country’s export dreams, which has been touted for years.
“The neighbouring countries will not opt to buy electricity from Ghana if the tariff level is higher than what they can buy from other countries,” he warned.
Reasons for surplus
While lauding the country for achieving excess supply, the World Bank Country Director for Ghana told journalists in Accra that the high tariff regime was the consequence of too many power purchase agreements (PPAs) signed within the past eight years.
Data available to the World Bank indicates that there are over 40 PPAs, majority of which have tariffs above the average in the sub-region.
“Our view is that the previous administration had too many PPAs; many more than is needed to satisfy the demand for electricity in Ghana,” Mr Kerali explained.
“We also believe from the figures we have seen from government that the tariffs signed for those PPAs were higher than similar tariffs in neighbouring countries. While the World Bank is not party to the contracts signed between government and the promoters of the energy projects, the tariff levels that we know are significantly higher,” he added.
Already, Mr Kerali said the situation had forced the World Bank to cancel a programme that was meant to provide guarantees for IPP projects in Ghana. The cancellation was to help reduce the quantum of excess supply in the midst of costly tariffs, he said.
“When we looked into the details, we found that the contracts that had already been signed without any of our guarantees were already leading to an oversupply of electricity,” he added.
What options
On options available to Ghana given the tariff differentials, Mr Kerali said the excess power could be exported at tariff levels that pertained on the regional market.
“Another option is to subsidise any export and bring them down to the level of the regional market or find ways to reduce the tariffs,” he said.
In Cote d’Ivoire, where Ghana exported power to before, tariffs are averaging nine cents and 11 cents compared to Ghana, where they are significantly higher.
To help address the issue, the President Akufo-Addo-led administration said earlier this year that it was reviewing the various agreements to help get value for money for the country.
The review, it said, included limiting tariffs on all new power agreements to 11 cents per kilowatt hour.
