ACEPS COMMENTS ON THE ENERGY SECTOR RELATED ACHIEVEMENTS WITHIN

100 DAYS OF THE NPP GOVERNMENT

18th April, 2017

On 17th April, 2017 the Vice President of the Republic of Ghana, Dr. Mahamudu Bawumia, presented
to Ghanaians a list of the incumbents achievement within the first 100 days since it took the reins of
government on 7th January, 2017. The Africa Centre for Energy Policy (ACEP) commends the
government for availing itself to, for the first time, give Ghanaians an update of its progress so far.
We encourage the government to continue this collaboration with the media and relevant stakeholders
as it serves as evidence of our strengthened democracy. ACEP hereby reacts to the energy-sector-
focused achievements as captured under bullets 51 to 59 of the Vice Presidents presentation as
follows:

51. Capped electricity power purchases at 10 Cents per KwH

ACEP recognizes the good intervention to ensure cheaper electricity delivered to the grid. We are
however not sure how the government arrived at the 10 Cent cap. What government should focus on
is to ensure efficient market-determined cost of generation. The existing politically determined cost of
generation through negotiated contracts is the reason tariffs are high. The solution therefore is not in
setting a cap, but aligning the real fundamentals that determine the cost of generation. A market-
determined price of electricity through competition within the context of efficient distribution system
that can guarantee offtake of power and transparent merit order dispatching is what is required to
generate cheaper electricity.

We note from the statement of the Vice President and the governments policy statements that the
government is going big on renewables. Depending on what renewable options Ghana wants, the 10
Cents per Kwh cap may be too high or too low. Base load renewable energy such as biomass and
hydro plants will cost between 15 20 Cents per Kwh. It is possible to achieve below 10 Cents cap
with solar energy in a global context where Chile recently set a new record of a 3 Cent per Kwh
contract. However, solar is not reliable for base load power supply.

52. Established policy to separate VRAs thermal operations from hydro

This effort is in the right direction as it will shift the burden of the highly mismanaged thermal
component of VRA from the company and improve efficiency of operation and decision-making
through private sector participation. ACEP however recommends for Ghana to have an arrangement
that still maintains some shares in the thermal company for VRA hydro to ensure that VRAs cash
flow is stabilized especially in times of low water levels in the dams.

53. Established a policy to move all major government buildings, schools, hospitals,
military, and police to solar energy

This policy will reduce the reliance of government institutions on the grid with associated default in
payment of bills to ECG that have had negative implications for the power sector. We however
caution government that the demand for electricity in many of the beneficiary public institutions will
exceed energy supply levels from solar installations within those premises. This means that the
electricity supply from solar will complement power supply from the grid. Government should
therefore pay its bills on consumption from the grid to ensure smooth supply. We also encourage
government to actively promote the incentives provided for in the Renewable Energy Act to
encourage widespread micro and macro-level investments.

54. $ 300 million saved by reviewing and prioritizing Power Purchase Agreements

While this is good, the government will have to provide further details and clarification on specific
projects that have been reviewed and prioritized. This will provide think tanks and civil society
groups the evidence to interrogate the numbers for the purpose of accountability.

55. Secured financing for two major rural electrification projects (Hunan and China
Water). This project when implemented would extend electricity to over 800
communities

The China Water Company and Hunan Energy projects existed under the previous government. In his
final State of the Nation Address (SONA), the former president indicated that these were pending
programmes that will bring more communities to the national grid. It is refreshing to know that the
current government has committed to continuing these projects by securing financing for
implementation. This will improve Ghanas position as the second leading country in terms of energy
access in Sub-Saharan Africa.

56. Transparent allocation of petroleum blocks: A team of experts has been constituted to
work with the Petroleum Commission to develop regulations for the transparent
allocation of petroleum blocks as provided by Act 919.

Open approach to the award of petroleum contracts has, for a long time, been advocated as an
efficient way of deriving the most value from Ghanas petroleum resources. The fact that the
government has taken steps to develop regulations in this regard shows its level of commitment to
operationalize Act 919. The Petroleum Commission should ensure that the relevant stakeholders have
the opportunity to input into the development of the regulation at the drafting stage to shorten the
rather protracted back and forth processes that characterise the status quo arrangement of taking civil
society inputs after draft regulations have been developed.

57. Uninterrupted production of oil and gas in the Jubilee Field due to a temporary
mooring solution. A long term permanent solution is being discussed. This solution has
saved Government USD 5million per month

The turret bearing challenge of FPSO Kwame Nkrumah increased cost of operation to the Jubilee
Partners which in turn affected revenues to government throughout 2016. The current temporary
mooring solution has eliminated the use of tug boats which cost the partners USD 5 million. This
effectively increases revenues to government. We however encourage government to speed up
discussions with the Jubilee Partners to conclude on the permanent solution. This also requires that
the government conducts an independent assessment of the options available, be it in situ or dry dock
fix, to determine which one provides a proper long term solution.
 58. New policy on sulfur content introduced. Effective 1st July, the sulfur content in our fuel
will be reduced from the current 3,000ppm to 50ppm. This will reduce respiratory
diseases triggered by fuel toxins with high sulfur content. Same level as western world
and East African countries.

Last year, ACEP began an advocacy on fuel sulfur content reduction in collaboration with our
partners, Public Eye, which went viral across the globe. This led to securing commitment from
industry players to import cleaner fuel into the country. ACEP has seen and submitted analysis on the
draft 50ppm standard to be implemented by the government alongside Nigeria in July, 2017. We
hereby remind government of the need to re-tool the Tema Oil Refinery (TOR) to be able to refine
fuel to meet the new standard.

59. For new PPAs, Government is moving from thermal to renewable energy

We currently need not to sign more thermal PPAs because what we have signed already exceeds our
projected demand in the short to medium term. The sustainability of the new policy to suspend PPA
for thermal generation however depends on how government is able to restructure the power sector to
eliminate the risks associated with ad hoc generation addition and power off-take.

ACEP wishes the government of Ghana well and encourages continuous dialogue on energy sector
issues.

Signed
Mr. Benjamin Boakye
Ag. Executive Director