Over US$2bn Energy Sector Debt Raises Concerns

The Institute for Energy Security (IES) has raised alarms over the mismanagement of the Energy Sector Recovery Levy (ESLA), warning that its collateralisation has left the energy sector burdened with over US$2 billion in debt after eight years of operation.

IES has questioned the accountability and justification for the collateralisation, noting that the levy has been generating about US$650 million annually to clear legacy debts and stabilize the sector. Despite this, the sector remains financially strained.

In a statement to the B&FT, IES highlighted that Ghana’s installed generation capacity was 4,599MW in December 2016, with a dependable capacity of 4,127MW meeting a peak demand of 2,078MW.

By the end of 2023, power generation capacity increased to 5,639MW, with demand reaching 3,618MW. However, this growth has been coupled with significant generation deficits and frequent outages, revealing inefficiencies in capacity utilization and planning.

The IES criticized the sector’s deteriorating state, which it attributes to poor management over the past eight years, despite inheriting substantial resources and opportunities. The institute described the power sector as having missed growth opportunities, resulting in operational and financial inefficiencies, mounting debts, mismanagement, and diminished public confidence.

Urgent Action Needed

IES has called for immediate government intervention to resolve the crisis and ensure reliable, affordable, and sustainable energy for all. It emphasized that while the restoration of the Asogli Power Plant is a positive development, it is insufficient to address ongoing power outages. The combined shortfall from non-operational plants and systemic inefficiencies means outages will persist unless the root issues are tackled.

“A comprehensive strategy addressing generation, distribution, and financial management is essential for achieving long-term stability and reliability in Ghana’s power sector,” the statement emphasized.

Restoration of Asogli Plant Insufficient

While the restoration of the 550MW Asogli Power Plant is a step in the right direction, IES noted that it only partially alleviates pressure on the grid. The sector remains vulnerable, particularly during peak demand periods, due to unutilized capacity (approximately 850MW) from other plants like Amandi, Siemens, and Karpower. The government’s reactive approach to settling financial commitments to power generators, including payments to Asogli after it shut down, reflects a lack of a strategic, long-term solution.

Recommendations for Action

IES has called for the immediate settlement of arrears owed to independent power producers (IPPs), warning that failure to do so could lead to prolonged power outages and significant economic disruption. Such a situation would undermine investor confidence in the energy sector and exacerbate the existing challenges.

The institute also urged the government to invest in gas infrastructure by expanding gas processing and storage facilities. This would help maximize the use of domestic gas resources, reduce reliance on imports, lower operational costs, and enhance energy security.

To address persistent power shortages, IES recommended implementing a reliable load-shedding schedule to minimize disruptions and allow businesses and households to plan effectively.