Ghana’s power sector crisis: A call for transparency, accountability & sustainable reforms – IES

The Institute for Energy Security (IES) has said it has observed with grave concern the deteriorating state of Ghana’s power sector under the current government, despite inheriting substantial resources and opportunities in 2017.

The sector, which was on a trajectory of recovery and growth, has suffered significant setback, IES said.

This sector, which plays a critical role in driving the nation’s economy and improving the lives of citizens, is now beleaguered with operational and financial inefficiencies, mounting debts, mismanagement, diminishing public confidence, and questionable choices, it added.

 

• Inherited resources and missed opportunities

As a starting point, it is important to note that in January 2017, the government of the New Patriotic Party (NPP) inherited a relatively stable power sector without extended power outages (dumsor). The government received a well-positioned power sector, including:

1. Excess capacity to meet demand: Ghana’s installed generation capacity stood at 4,599 MW, with a dependable capacity of 4,127 MW, serving a peak demand of 2,078 MW in December 2016.

• While capacity has increased to 5,639 MW at end 2023, demand growth to 3,618 MW has been met with significant power generation deficits and frequent outages, exposing inefficiencies in capacity utilization and planning.

 

2. ESLA introduction: The Energy Sector Recovery Levy (ESLA) had been introduced in 2016, and generates about $650 million annually to clear legacy debts and stabilize the sector.

• However, proceeds have been misapplied through collateralization, leaving the sector saddled with over $2 billion in debt after eight (8) years, raising questions about accountability and the justification for collateralization.

 

3. Transition to natural gas: By 2017, Ghana had significantly reduced reliance on liquid fuels and shifted to domestic natural gas resources from Jubilee, Tweneboa- Enyera- Ntomme (TEN), and Sankofa Gye Nyame (SGN) fields.

• Despite this progress, domestic gas optimization has stagnated, forcing reliance on imported liquid fuels and Nigerian gas, a clear failure to build on inherited gains.
• Eight years on, Ghana continue to depend on a single gas processing plant, largely for its power generation needs. This neglect of critical infrastructure expansion has constrained domestic gas utilization and compromised energy security.

 

4. Financial performance of utilities: Prior to 2017, the Electricity Company of Ghana (ECG) was recording profits, and the VRA was not struggling with cash flow constraint.

• Once-profitable state utilities such as ECG and VRA have become financially distressed. ECG now incurs technical and commercial losses exceeding 30%, with monthly revenue collections as low as 50% of expected revenue. The Public Utilities Regulatory Commission (PURC) estimates monthly revenue losses of $67 million.

 

5. Private sector participation: Between 2014 and 2017, an agreement emerged from the Millennium Challenge Corporation (MCC) Compact II, signed between the U.S. and Ghana. A significant component of the compact was the Private Sector Participation (PSP) in ECG to improve management and inject capital into Ghana’s electricity distribution sector.

• The MCC partnership to restructure the Electricity Company of Ghana (ECG) was derailed due to transparency and accountability issues.

 

6. Non-Compliance with CWM: By 2017, the Cash Waterfall Mechanism (CWM) had been designed and implemented to ensure fair and equitable revenue distribution across the value chain.

• The CWM is now plagued by the diversion of funds and lack of adherence, exacerbating the financial challenges of all stakeholders.

 

7. IPPs operations uninterrupted: Government had a healthy relationship with the Independent Power Producers (IPPs) and there were no threats of shutdowns.

• Relations with IPPs have soared since 2021, with shutdown threats of withdrawal due to unpaid bills. In October 2024, Asogli Power (550 MW) for the second time in a year shut down for debt payment default. Three other IPPs ceased operations few days ago, exacerbating the energy crisis. The government’s inability to resolve these payment issues has disrupted power supply chains.

 

8. Transparency issues: Power generation information was readily available on GRIDCo’s website 24/7, providing transparent data on generation, exports, and system conditions.

• In the past few years, that publicly available data had been pulled down from GRIDCo’s website, to suppress information. Access to the power system condition information is available to the public, only through the backdoor. GRIDCo’s recent labelling of the power system “Condition Sheet” as “private and confidential” and removal of export data highlights a troubling lack of transparency in energy sector operations.

These developments demonstrate the government’s failure to manage inherited resources effectively, jeopardizing the country’s energy stability and future investments.

 

• Key concerns

Ghana’s power sector now faces unprecedented challenges such as:

• Increasing power outages: The recurrence of dumsor (load-shedding) is disrupting businesses and households, undermining productivity and economic growth. Unstable electricity supply raises operating costs for industries, with many resorting to expensive alternatives like diesel generators, further inflating production costs and reducing competitiveness.
• Non-payment of arrears to IPPs: Independent Power Producers, which contribute over 60% of Ghana’s power generation, are facing severe financial strain due to unpaid arrears. This is the situation that has led to shutdowns, significantly reducing generation capacity and jeopardizing energy security.
• Rising reliance on imported fuels: Despite Ghana’s significant natural gas reserves, policy inertia and declining domestic production have increased reliance on imports, exposing the sector to global fuel price volatility and foreign exchange pressures.
• Declining public trust: The sector’s lack of transparency, evidenced by restricted access to critical data such as GRIDCo’s daily “Condition Sheet,” undermines public confidence. Citizens and stakeholders are left in the dark regarding power generation, exports, and systemic challenges.
• Financial mismanagement: Utilities such as the Electricity Company of Ghana (ECG) and the Volta River Authority (VRA) are burdened by inefficiencies, including high technical and commercial losses exceeding 30%. This exacerbates the sector’s financial challenges and limits its ability to sustain operations.

The ongoing power crisis is avoidable given the resources inherited. The crisis is not merely a technical failure but a symptom of deeper governance issues. In fact, these issues are preventable and highlight inefficiencies that must be urgently addressed.

 

• Restoration of Asogli not enough

The restoration of the 550 MW Asogli Power Plant is a positive but partial step in addressing Ghana’s current power crisis. While it alleviates some immediate pressure on the grid, it is not sufficient to resolve the systemic power outages entirely. The electricity deficit in Ghana is a multifaceted issue involving generation capacity, financial inefficiencies, and operational challenges across the power value chain. It must be noted that;

1. The remaining unutilized capacity (approximately 850 MW) from other plants such as Amandi, Siemens, and Karpower means that the power sector remains vulnerable to deficits, particularly during peak demand periods.
2. The payment to Asogli demonstrates the government’s reactive approach rather than a strategic, long-term solution to the financial constraints facing IPPs. Delayed payments to IPPs threaten the reliability of the power supply and erode investor confidence in the sector.
3. Systemic Challenges Persist: Even with Asogli back on stream, the unresolved issues of non-payment, technical losses, and inefficiencies in cash flow distribution continue to undermine the power sector. These challenges exacerbate the risk of future shutdowns.

 

• IES’ Demands

1. Immediate resolution of IPP arrears: The government must prioritize the settlement of outstanding debts to IPPs and state utilities to restore confidence and full generation capacity. Failure to do so could result in prolonged outages and heightened economic disruptions.
2. Adherence to the CWM: The CWM ensures equitable revenue distribution across the power sector’s value chain. Its proper implementation would alleviate financial bottlenecks, particularly for upstream suppliers and transmission operators.
3. Restoration of transparency: Reinstate public access to critical power sector data, including GRIDCo’s daily “Condition Sheet.” This will enable informed decision-making by stakeholders and enhance accountability within the sector.
4. Investment in gas infrastructure: Ghana must expand its gas processing and storage facilities to fully utilize domestic gas resources. This would reduce dependency on imports, lower operational costs, and strengthen energy security.
5. Policy and institutional reforms: The government must enact reforms to improve the governance and efficiency of utilities like ECG. Measures should focus on reducing technical and commercial losses, enhancing revenue collection, and fostering private sector participation.
6. Load management planning: In the face of persistent shortfalls, a reliable load-shedding schedule is essential to minimize disruptions and allow businesses and households to plan effectively.
7. Long-term energy policy framework: Establish a comprehensive energy policy focused on diversification, renewable energy development, and sustainable financing mechanisms.
8. Rebuild investor confidence: A transparent and predictable payment structure is critical for attracting and retaining private sector investment.

 

• Conclusion

The government has been wasteful with the resources and opportunities it assumed in the power sector. The current but avoidable power crisis demands urgent action to restore investor confidence, stabilize the sector, and protect Ghana’s economic growth and social future. The IES call on the government to act urgently to address the crisis and ensure reliable, affordable, and sustainable energy for all.

The restoration of the Asogli power plant alone is insufficient to eliminate power outages. The combined shortfall from other non-operational plants and the systemic inefficiencies within the sector mean that outages will persist unless the underlying issues are resolved. A comprehensive strategy addressing generation, distribution, and financial management is essential to achieve long-term stability and reliability in Ghana’s power sector.

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