Roundup: Businesses benefit as Ghana energy crisis subdues

Interventions by government and private sector partners in the energy sector in year 2016 have brought improvement into power supply, and benefited the industry sector in Ghana.

This has led to improved performance by businesses in 2016 compared with the situation amidst the crippling energy crisis that started three years ago, which had negative impact on economic and business growth.

Stable Power Supply Reduces Cost of Doing Business

One of the benefits of the stable power supply regime for companies is the lower cost of doing business, as companies which had to depend on diesel-run generators are saving that additional cost.

"During the power crisis two years ago, we invested in diesel generator sets so any time power went off, we switched to our own generating sets so that production was not interrupted," Dennis Arhin, Head of Utility at Accra Brewery Limited, told Xinhua.

Erratic power supply even culminated in the folding up of some businesses, with the state power producer, Volta River Authority, projecting 1.5 billion U.S. dollars expenditure to improve the situation.

Contributing to the situation was the irregular flow of gas through the West Africa Gas Pipeline constructed to supply gas from Nigeria to the Republics of Benin, Togo and Ghana. Further worsening the power situation was the intermittent shutdown of the FPSO Kwame Nkrumah that supplied gas from Ghana's own Jubilee oil field.

However since December 2015, Arhin said the power situation had been stable, except for some short periods of planned maintenance during which companies were given a 24-hour notice.

Although cost of grid energy has been increased, he argued that it is still more affordable to work with grid power than with generating sets since fuel prices and servicing costs have also gone up.

"Now, everything about power is predictable and it helps us to have better planning and efficient production," he added.

The West African country used to depend heavily on cheap hydro sources since the Akosombo dam was constructed in 1961 and the Kpong Dam that was commissioned in 1982. The dams however have been under serious threat from erratic rainfall patterns.

In the past, the two dams gave the country a total of 1,187 megawatts (MW) of electricity, but this has suffered a setback as a result of lower rainfall patterns.

Natural Gas to the Rescue

Between 1994 and 1996, Ghana saw the need to start building thermal plants when the first major energy crisis occurred, and has installed nearly 3,000 MW of installed thermal capacity so far.

With this development, Ghana now depends heavily on thermal power generation using light crude oil and gas from Nigeria through the West African Gas Pipeline to keep the plants constantly delivering the needed power for industry and domestic uses, but at a high cost.

Through a China Development Bank financing, China's Sinopec Petroleum Corporation constructed Ghana's first and only gas processing plant at Atuabo, 332 km west of the capital, where 120 million standard cubic feet of gas from the Jubilee field is processed daily and supplied to the thermal plants at Takoradi, 218 km west of Accra.

The Tweneboa-Enyenra-Ntomme field, with capacity to provide at least 60 million standard cubic feet of gas per day, will be starting full oil production early 2017.

Although the government, under out-going President John Dramani Mahama has not been able to achieve the 5,000 MW generating target it set for 2017, it has at least been able to achieve more than 4,000 MW generating capacity through both public and private investments, with a number of thermal plants also nearing completion to add to the existing capacity.

Economic Impact

Ghana's three-year energy crisis affected economic growth, with a subdued annual GDP growth rate of 4.0 percent in 2014, and 4.1 percent in 2015 from 6.6 percent in 2013 and an all-time high of 14.8 percent in 2011.

Industry watchers believe that, with a stable power situation in 2016, industry would perform better than it did in the two preceding years.

"Of course, the impact is positive, and is what is making us to expect a stronger GDP growth in Q4 of 2016. The challenge is maintaining this and ensuring that electricity supply remains stable in 2017," economist Sampson Akligo of Investcorp Ghana Limited, a local investment banking institution commented in a mail.

The West African country's economy grew 4.9 percent and 2.5 percent in the first and second quarters of 2016 respectively.

In spite of the increased generating capacity, the cost and availability of fuel remains one major challenge going forward, due to the heavy dependence on thermal generation.

The high cost of power could be a disincentive to industry and Ghana's competitiveness on the global market place, says Senyo Hosi, Chief Executive Officer of Bulk Distribution Companies, a local cartel of bulk petroleum distributors.

"Power situation in 2016 is a much better improvement than 2015, but that also comes with its own implications for industry; the cost factor. We know there's been quite some improvement on generation that the government embarked on. That was quite positive but the key thing is at what cost?" the CEO asked.

The incoming New Patriotic Party administration, led by Nana Addo Dankwa Akufo-Addo appreciates the need to increase the generating capacity of the country but is also aware of the financial administration of the energy sector which needs to be tackled head-on to allow for secured fuel supply for energy production. Endit