In Ghana’s Clean Energy Transition, Ambition Meets Caution

Interest in Ghana’s solar market is booming. However, the nation has a long way to go to reach its goals. As of March 2017, the Ghanaian Energy Commission had issued provisional licenses for developers to install roughly 3000 MW of photovoltaic capacity.

Actual growth is much slower. According to a recent article in Renewable and Sustainable Energy Reviews, construction and siting permits have been issued for just 54 percent of this capacity. And as of May 2018, only two projects totaling 22.5 MW are operational.

Some of this delay is by design. “We’ve had over 100 companies who have shown interest to develop large-scale, utility-scale solar, wind and bioenergy projects,” said Frederick Kenneth Appiah, chief program officer of renewable energy with the Energy Commission. “But of course, they have to go through a process.”

This process is part of a well-developed regulatory system supporting Ghana’s renewable energy target, which was set in 2006 and updated in 2010. Ghana has a target of 10 percent electricity production from renewable sources by 2020, according to International Renewable Energy Agency (IRENA). This is an increase from zero percent in 2006. It has just under one percent today.

Ghana has a host of active or proposed policies regulating renewable energy development. These include a feed-in tariff, a renewable energy-purchase obligation, a net metering scheme, a renewable energy act, and its renewable energy target. 

In other countries, similar policy and regulatory environments have created solar booms. For Ghana, the question remains: will these policies attract the development needed to meet the country’s ambitious target?

Robert Sogbadji, deputy director of renewable energy at the Ministry of Energy and Petroleum, said he has some optimism. “Even though we have policies and guidelines and regulations on solar, we are still improving.”

For example, he said, the Renewable Energy Act requires that Ghana establish a new government authority dedicated to renewable energy.

Learning from countries with well-developed solar policies is central to this improvement.

“We still believe that we are still crawling,” Sogbadji said. “That is why we are dealing with experienced partners like Germany to be able to get a good grasp of how we will be able to integrate our renewable energy into our system.”

While the pace of development has been slow, Ghana’s measured approach may yet yield big results. One goal of the renewable energy authority is regional cooperation. Ghana is well positioned for clean energy leadership in West Africa.

“The future is so bright,” Sogbadji said.

Getting the Price Right

Historically, Ghana’s electricity system has depended heavily on hydropower. According to the Energy Commission, around 42 percent of the country’s power capacity is provided by three large hydropower facilities. Most of the remaining power is generated in thermal power plants running on oil or natural gas.

High electricity costs pose a longstanding economic challenge. In its most recent Energy Outlook report, the Energy Commission listed a dramatic reduction in electricity tariffs as a key goal.

“Ghana could lose its competitiveness as an investment destination since her average grid electricity pricing is about twice higher than in South Africa, China and India,” the report reads. 

Overcapacity is also a problem. According to the Energy Commission, electricity demand peaks around 2,000 MW, which is dwarfed by the country’s installed capacity of almost 4,000 MW.

“There is excess power due to the emergency power crisis period,” Appiah said. During this period, fuel shortages created frequent outages. “We contracted certain thermal power plants. So now we have power plants that are available, but our peak demand is low.”

To reduce electricity rates, Ghana has introduced a competitive capacity market. In the short term, this strategy has paid off.

“The Public Utility Regulatory Commission announced that residential rates are going to be reduced by 17.5 percent and commercial rates reduced by 30 percent,” Sogbadji said, siting competitive supply as a causal factor.

Can solar compete in this competitive environment? According to Appiah, the high cost of solar has been a traditional barrier to implementation. “We want to bring more renewables on board, it should not come at a high cost.”

With an eye toward declining electricity rates, the government has indicated that it would not sign any power purchase agreement (PPA) above $0.10 per kWh, Appiah said.

Learning from Germany

In fact, solar can be sold at lower prices. According to Sogbadji, pushing developers toward lower prices has been a learning experience.

“We didn’t used to tender for solar projects. We used to come and identify a PPA. It raised the cost of electricity in the country,” Sogbadji said. “When we started our solar program, a lot of companies were coming in with very ridiculous PPAs over $0.20-0.25 per kWh.”

Electricity Company of Ghana (ECG), the larger of the two state-owned distribution utilities in Ghana, has tendered the majority of solar projects in the country. According to Appiah, “They have signed so many PPAs that they are now reviewing them to make sure they get a competitive price.”

According to Climatescope, investors have balked at financing new projects with ECG. Support from international experts may help improve investor confidence with future projects.

GIZ and African Development Bank helped provide support for the government as it engaged in initial bidding for solar projects. “When we went for bidding, the first time we went as low as $0.11 cents. Next, we went to around $0.09. Next, we are looking to go below $0.08 cents per kWh.”

Sogbadji said Germany assisted in helping create policies that Ghana uses in its bidding process. “They have experience. They’ve gone through the rocks and the rough terrain.

They know the challenges they have had.”

Germany is now helping Ghana establish its net metering scheme.

“If we had started fresh, we would make a lot of mistakes with the net metering,” Sogbadji said. “We have to start from where they ended, not where they started from.”

Building on lessons learned by others is Ghana’s chosen strategy. “You have to be a smart customer to make sure it’s a win-win situation for everybody,” Sogbadji said. 

For Ghana, being a smart customer means taking a cautious approach. The Energy Commission’s licensing process is a good example. Appiah said there are three stages to this process. First, a developer is approved for its intention to develop a certain capacity. Next, the site is approved by a technical committee. Following construction, the Energy Commission issues a final license allowing the project to operate.

This process is lengthy and time-consuming, but important to technical regulators concerned with the state of the grid. Ghana’s aging grid infrastructure has line losses estimated at over 20 percent, according to the World Bank.

“Our grid network is not robust enough to take a lot of solar injection,” Sogbadji said.

GIZ has helped with technical feasibility studies to assess how much solar can be injected to the grid. And the grid is improving. Substations are being constructed, Appiah said, and connections with neighboring countries allow power exports. These are important steps required for large-scale renewable energy integration. 

Meeting Energy Targets

In addition to the 10-percent-renewable-energy-supply target, Ghana has set a goal to achieve universal access to electricity by 2020. According to Appiah, renewable energy makes this goal achievable.

In 2016, Ghana established an incentive program for residential solar, which covered 20 percent of the installation cost for homeowners. “Raising the 80 percent is challenging to some people,” Appiah said. With the power crisis over, households see little reason to go solar.

The program has shifted attention to rural, off-grid communities. “Ghana’s electrification rate is about 85 percent,” Appiah says. “So almost 15 percent of communities in Ghana are not connected to the grid.”

Many of these communities are located on remote and difficult-to-reach islands. Hydro-solar microgrids are a potential solution to electrify these communities. This model has many benefits, according to Sogbadji. Hydropower depletes water that could be used for other uses. When paired with solar, the hydropower can be turned off during the day and then turned on at night.

Electricity availability is at around 95 percent, Sogbadji said. The water can be used for other purposes during the day when it is most needed.

Small-scale hydropower has great potential across West Africa. Large hydropower may become important too. Ghana’s renewable energy total does not include its hydropower, unlike the totals cited by many nations elsewhere, Appiah said.

“We can see that in Norway or Sweden, renewable energy is almost more than 80 percent, but it includes large hydropower. But in Ghana, we talk about renewable energy and we say only 1 percent,” Appiah says. “Meanwhile, we have hydropower.”

If Ghana does include large hydropower in its renewable energy total, according to Sogbadji and Climatescope, it will not count toward the 2020 renewable energy goal. For this, Ghana must develop solar, wind, and small-scale hydropower.

Creating renewable energy markets is urgent from a climate perspective, but Appiah said he has confidence that the country has taken the correct approach in steadily creating a policy and regulatory framework that can handle a rapid increase in renewable energy. “We are developing renewable energy bit by bit. It may be slow, but we are sure of what we are doing.”

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