ACEP Warns Government’s Planned 1,200MW State-Owned Thermal Plant Could Deepen Sector Inefficiencies
Energy Policy Analyst at the Africa Centre for Energy Policy (ACEP), Kodzo Yaotse, has raised significant concerns over Government’s proposal to construct a 1,200-megawatt state-owned thermal power plant, cautioning that the initiative may not yield the intended benefits of lower tariffs and improved energy security.
Speaking to NorvanReports on the sidelines of the 2026 Budget Review & Media Engagement organised by the CSOs Budget Forum, Mr Yaotse noted that Government’s justification for the project is based on the belief that existing Independent Power Producer (IPP) contracts are too costly.
According to him, Government assumes that generating power through its own facility would translate into savings and ultimately cheaper electricity tariffs. “In the belief of government, if they set up their own power plant that is working, then the charges that the IPPs charge will become savings because they are generating their own, and that will translate into cheaper tariffs for the country. That is the theoretical assumption,” he stated.
However, Mr Yaotse argued that past experience with state-owned power generation does not inspire confidence. He pointed to the operational performance of the Volta River Authority (VRA), noting that political interference has undermined its effectiveness and financial sustainability. “If you look at how the VRA has operated, it doesn’t give any confidence that a state-owned and operated power plant of that magnitude is going to generate the revenue that it should,” he said.
He further revealed that despite the heavy presence of state-owned enterprises (SOEs) in the energy sector, many of them continue to struggle, raising doubts about Government’s capacity to efficiently manage an additional large-scale utility. There are also indications that the proposed plant may not even be handed to the VRA but rather to a newly created state entity — a move he believes would introduce yet another layer of bureaucratic inefficiency.
A major concern, he noted, is the likelihood of liquidity constraints affecting the performance and sustainability of the planned plant. In such situations, Government typically prioritises payments to private operators, leaving state-owned entities underfunded. This, he said, could weaken returns on public investments and further aggravate the financial health of the sector. “When there are liquidity challenges, they will prioritise the private business because they can chase them for those monies,” he warned.
Mr Yaotse also referenced ongoing criticisms of Government’s current investment decisions, particularly those yielding returns as low as 1% annually. He fears that investing in a new thermal plant without first resolving underlying governance and operational issues could produce even lower returns.
He stressed that Government must address systemic inefficiencies, governance lapses and liquidity risks across the energy sector before committing resources to such a massive infrastructure project. “If we don’t fix those governance issues that impact on the risks that we see, then we shouldn’t venture out there,” he cautioned.
Alternatively, he suggested that if Government insists on making such an investment, it should consider channeling resources into sectors where similar risks do not exist and where returns can be guaranteed.
The debate over the proposed 1,200MW plant comes as Government seeks long-term solutions to stabilise the power sector, reduce costs, and ensure reliability, but analysts like Mr Yaotse argue that without structural reforms, new projects may only compound existing challenges.
Dr Cassiel Ato Forson, the Minister for Finance, presenting the 2026 Budget Statement and Economic Policy to Parliament, stated that the new power plant will utilise an additional 150 million standard cubic feet of gas per day from Ghana’s Offshore Cape Three Points (OCTP) partners and the soon-to-be-developed Ghana Gas Processing Plant Two (GPP 2).
The Finance Minister further noted that the project aligns with government’s Gas-to-Power Strategy, which seeks to transition from costly light crude oil to cleaner, domestically produced natural gas for power generation.
According to him, the shift is expected to cut generation costs by at least 75 percent, reduce the energy sector’s financing shortfalls, and minimise its fiscal impact on the national budget.
