SUSTAINABILITY OF THE CURRENT SYSTEM

The current system of Ghana’s energy sector may have sustainability concerns from the economic, environmental and social points of view. The economic sustainability concerns may arise from the fluctuating fuel prices and the unreliable supply from the West African Gas Pipeline (WAGPCo). The Energy Commission of Ghana stated that the shortfall of fuel to power the thermal plants in 2016 are light crude oil of 5.9 million barrels at $46 per barrel will amount to $354 million while HFO of 2.8 million barrels at $72 per barrel will amount to

$201. 6 million, natural gas of 54,900 mmscf at $ 9 per mmscf will cost $ 489 million and diesel estimate of 1.4 million barrels at $90 per barrel will amount to $ 136 million. The total money required to meet the fuel need of the plants amount to $ 1.18 billion. See the table 3.

Table 3. Estimated fuel needed for thermal plants and cost for 2016 (Energy Commission, 2016).

Type of

Diesel 90*/bbl 1,51 million 135,900,000

Total 1,185,600,000

72*l = 1.2 LCO delivery cost and 90* = 1.5 LCO delivery cost

The current generation mix and the projected mix for the 2016 puts Ghana into the category of

‘very expensive’ grid tariff in Africa. The increase in tariff due to the generation mix has the potential to reduce electricity consumption by commerce, services and industry, which are critical sectors for wealth creation. The expected reduction in electricity consumption in those sectors is expected to affect the overall economic growth of Ghana that is projected to grow marginally from3.5 – 3.9% to 4% in 2016. The current mix is not only detrimental to wealth creation, it will impose extra tariff on residential consumers (Energy Commission of Ghana 2016).

The African Centre for Energy Policy stated that in 2016, thermal power plants provided some supply stability at a “huge cost to consumers as electricity increased by more than 60%”. This huge increase in prices did not however guarantee a consistent electricity delivery to the power grid.

The net effect of the statements from the Energy Commission and the Africa Centre for Energy Policy is that the current energy generation mix of Ghana is not economically sustainable as it imposes burden on consumers and the government and power producers. Table 4 shows the tariff for non-residential consumers in 3 years running and table five shows selected tariffs for some customers’ categories.

Table 4. Tariffs for nonresidential consumers (Energy Commission, 2016).

Consumption

Category (kWh) Rate

Gp per kWh US cents per kWh

Year 2014 2015 2016 2014 2015 2016

0 - 300 45,2 60,79 96,79 16,99 16 25,47

301 - 600 48,1 64,69 102,99 18,08 17,02 27,1

601+ 75,9 102,08 162,51 28,53 26,86 42,77

*US $ 1 = GHC

2,66 2014

*US $ 1 = GHC

3,80 2015

*US$ 1 = GHC 3,80 2016

Table 5. Electricity tariffs for selected customers in 2016 (Energy Commission, 2016).

Ghana was classified by the World Bank as a lower middle-income country in 2011, Ghana’s per capita electricity consumption fell short of the average consumption per capita in the lower middle-income countries. This could be attributed to the erratic power supply due to the fall in the water levels of the reservoirs of the Akosombo and Kpong hydroelectric dams and unstable gas supply for power generation by the thermal plants. Figure 10 shows the per capita electricity consumption by the economic classifications.

Figure 10: Per Capita electricity consumption by economic classifications, 2013 (Prepared from the World Bank Data).

The electricity consumption per capita for Ghana is approximately 400 kWh while the average per capita electricity consumption for the income category of lower middle income countries is more than 700 kWh. If Ghana’s economy status is to improve into the income categories of low and middle income, the capita electricity consumption must increase by more than 1000 kWh, if all things are equal. To achieve that in the current energy generation mix requires substantial gas, LCO, HFO and diesel procurement whose prices are unstable due to international situations. This in turn makes the price of electricity expensive for the consumers, thereby making the system unsustainable economically. This assertion is further strengthened by the ISSER report, which stated Ghana lost close $ 680 million in 2015 due to the power crisis.

One of the major problems of the energy sector of Ghana is the insufficient access to modern energy facilities. The problem has made the dependence on traditional biomass sources like fired wood and charcoal very high to meet household energy needs. It has been reported that 76% of household in Ghana use firewood and charcoal for heating and cooking. This dependency on firewood and charcoal has led to loss of forest resources and environmental degradation, which has been of concern to both stakeholders at all, levels of governance. It has been argued that the dependence on fire wood and charcoal for household cooking and water

Ghana

Per capita electricity consumption by economic status in 2013

heating is the main driver of the loss of the nation’s forest cover which is estimated at 2% loss per a year (Mensah, Marbuah & Amoah 2016).

The over reliance on traditional biomass to meet the heating and cooking needs of more than 70% of Ghanaian if not controlled will compromise the environmental sustainability efforts by the government of Ghana. To limit the environmental consequences of deforestation due to felling of trees for fuel wood and charcoal, the government launched a liquefied petroleum gas utilization program which saw LPG use more than doubled from 1990 to 2004 (Mensah, Marbuah & Amoah 2016).

Ghana’s projected LPG need for 2016 is between 290,000 tones to 300,000 tones for an estimated economic growth of 4.5% for the year. It is however estimated that if the economic growth is above the 4.5% projection, demand for LPG will be between 300,000 tones and 350, 000 tones due also to the increase in demand from households and transportation. Economic growth makes the demand for LPG as a cooking fuel in homes to grow. While the demand for LPG will grow if the economic growth projected is exceeded, there is a limited storage capacity in the country (Energy Commission of Ghana 2016).

These constraints mean that Ghana’s dependence on traditional biomass for cooking and heating will continue until there is enough storage and economic capacity to provide modern energy services. This in effect mean that fetching of firewood and felling of wood for charcoal will continue with its attendant environmental consequences.

Although Ghana is not a heavily industrialized country, the country’s CO2 emission has been growing steadily, especially in the last 3 years. In figure 11 below, Ghana’s carbon dioxide emission per capita is shown. It can be seen that the emissions per capita has been growing steadily. With a growing carbon dioxide emission, deforestation and land degradation because of search for fuel for primary energy, Ghana’s energy sector cannot be said to be environmentally sustainable.

Figure 11: The carbon dioxide emission trend in Ghana (Plotted by the author).