Ghana's electricity sector faces considerable challenges, with a pressing need to address the underutilized generation capacity that places significant financial strain on the Electricity Company of Ghana (ECG), a Power Systems Economist, Dr.
Elikplim Kwabla Apetorgbor, has said.To that end, he has called for licensing of Independent Power Generators in Ghana under the Ghana's Free Zones Act.He said licensing the country's electricity capacity market, particularly for Independent Power Generators (IPGs), under the Ghana Free Zones Act, presents a viable solution to enhance Ghana's competitiveness in the West African regional electricity export market."This approach will not only enable Ghana to capitalize on regional energy demands but will also help alleviate the economic and operational burdens associated with the under-utilized capacities," he said. Understanding Ghana's Capacity Challenges in the Electricity SectorGhana's power sector has experienced notable expansion over the years, resulting in installed capacity far exceeding domestic peak demand.
Despite this growth, Ghana's energy market suffers from inefficiencies and financial burdens tied to surplus generation, as outlined below: Capacity Under-utilization: Ghana's installed generation capacity is approximately 5,300 MW, while peak demand over 3600 MW, creating an excess of generation capacity. Financial Strain from Take-or-Pay Contracts: Most IPPs operate under take-or-pay agreements, obligating ECG to pay for unutilized or idle capacity, which has culminated in a sector debt of around $2 billion. Limited Competitive Pressure: The current market lacks incentives for IPPs to innovate or reduce prices, given their reliance on guaranteed payments and fixed tariffs through take-or-pay contracts. These conditions highlight the need for innovative solutions that can integrate Ghana into regional electricity markets, where its excess capacity could meet demand in neighboring countries, providing economic benefits and relieving ECG of the financial burdens associated with surplus capacity. The GFZA As A Framework for Electricity Export CompetitivenessThe Ghana Free Zones Act, enacted in 1995, provides a favorable regulatory framework aimed at attracting investment, stimulating exports, and enhancing Ghana's economic integration into regional and global markets.
Traditionally applied to manufacturing and trade, the Act's principles can be effectively extended to the electricity sector to support IPPs in becoming competitive electricity exporters.