IES Demands Urgent Reforms to Address Ghana’s Energy Sector Crisis
The Institute for Energy Security (IES) has issued a series of demands to the government, urging immediate action to resolve the challenges plaguing Ghana’s energy sector.
In a statement dated November 26, 2024, the IES expressed grave concern over the deteriorating state of the sector, which it asserts has regressed despite the substantial resources and opportunities inherited by the current administration in 2017.
According to the IES, the energy sector, once on a recovery trajectory, is now beset with financial inefficiencies, mismanagement, and declining public trust.
This, coupled with mounting debts and operational setbacks, has undermined the sector’s ability to drive economic growth and enhance citizens’ livelihoods.
IES’s Demands for Reform
The IES outlined several key measures it believes are essential to restore stability and growth in the sector:
- Immediate Settlement of IPP Arrears: The government must prioritize the payment of debts owed to Independent Power Producers (IPPs) and state utilities. This is critical for restoring confidence and ensuring full generation capacity to avert prolonged power outages.
- Adherence to the Cash Waterfall Mechanism (CWM): Ensuring equitable revenue distribution across the value chain will alleviate financial constraints, particularly for upstream suppliers and transmission operators.
- Enhanced Transparency: Reinstating public access to key power sector data, such as GRIDCo’s daily “Condition Sheet,” is crucial for informed stakeholder decision-making and accountability.
- Investment in Gas Infrastructure: Expanding gas processing and storage facilities will optimize the use of domestic gas resources, reduce reliance on imports, and enhance energy security.
- Institutional Reforms: Improving the governance and efficiency of utilities like the Electricity Company of Ghana (ECG) is essential. Reforms should focus on reducing technical and commercial losses, boosting revenue collection, and promoting private sector participation.
- Load Management Planning: The government must implement reliable load-shedding schedules to minimize disruptions and enable effective planning for businesses and households.
- Comprehensive Energy Policy: A long-term framework focused on energy diversification, renewable energy, and sustainable financing mechanisms is vital for sector stability.
- Rebuilding Investor Confidence: Establishing a transparent and predictable payment structure will help attract and retain private sector investment.
Challenges Highlighted by the IES
The statement identified several pressing issues contributing to the sector’s instability:
- Increasing Power Outages: Recurring load-shedding (dumsor) disrupts economic activities, inflating production costs for businesses and reducing competitiveness.
- Unpaid Arrears to IPPs: Financial difficulties faced by IPPs, which supply over 60% of Ghana’s power, have led to shutdowns, threatening energy security.
- Rising Dependence on Imported Fuels: Despite Ghana’s significant gas reserves, policy inaction and declining domestic production have increased reliance on costly imports, exposing the sector to global price volatility.
- Erosion of Public Trust: Limited access to critical data and lack of transparency undermine confidence among citizens and stakeholders.
- Financial Mismanagement: High technical and commercial losses, exceeding 30%, exacerbate the sector’s financial woes, limiting operational sustainability.
IES’s Call to Action
The IES criticized the government’s handling of resources and opportunities in the power sector, describing the current crisis as avoidable.
It has, however, urged authorities to take decisive steps to restore investor confidence and stabilize the sector to protect the nation’s economic growth.
The institute emphasized the need for reliable, affordable, and sustainable energy to support Ghana’s development, calling on the government to act urgently to address the crisis and implement the necessary reforms.
