Let VRA Manage Power Supply ACEP

The Africa Centre for Energy Policy (ACEP) says it does not understand why the Finance Minister should continue to micro-manage the procurement of fuel for power generation after adjusting tariffs to raise the needed financing for the utilities.

According to ACEP, there was no indication that that would change going forward, hence the need to allow VRA to take control of its operation and become directly accountable for the management of the supply of power.

In a recent assessment of the supplementary budget submitted to Parliament, ACEP stated that the minister also proposed to micro-manage future financial commitments of VRA.

It added: “This is not in keeping with the need to restructure the state agency away from direct government control, which indeed is the reason VRA is now financially paralyzed. The picture being painted that VRA management is the reason for its financial woes is erroneous.”

Ministerial interference

ACEP stated that the problem was the direct interference by the two ministers in the governance of the power sector.

“VRA made profit as recent as 2011. This can be replicated if it is allowed to simultaneously take independent decision and remain accountable to government. VRA should also be supported with sovereign, as done for private companies, to raise financing. For example, why is VRA not being supported with government guarantee to raise funds to revive T3 plant rather than selling it to Ameri.”

ACEP further said the Finance Minister promised in the 2016 Budget to conduct research into the impact of load-shedding on businesses. However, this was not done in the first half of the year.

“Neither was any update given in the supplementary budget. The trend in electricity consumption makes this impact analysis very critical.”

Power demand

Furthermore, it said Ghana was projected to consume 2400MW of power by the end of 2014 but given a growth rate of 10 percent, according to the Energy Commission, Ghana’s demand should be around 2900MW at peak in 2016.

“However, the trend does show that demand has actually declined, as the total peak demand today averages 2000MW. All other things being equal, this apparent contraction in energy intensity is worrisome for a country that aspires for industrialization.

“We therefore need to be cautious about electricity demand projection and the number of IPPs being hurriedly mobilized with government guarantees.

Another thermal plant

It cited another power agreement, which was before Parliament as the Early Power 400MW thermal plant estimated to cost $953 million.

“ACEP is studying the contract and its financial implication for the power sector and will come out soon with the analysis.

“ACEP is worried about power supply security without Nigeria gas. Our analysis show that without Nigeria gas load management will continue at least to the end of the year. The total available capacity at peak will be in the region of 2000MW which is equal to the 2,000MW currently demanded at Peak. This also leaves no reserve margin for unexpected loss of a generation unit given the consistent unreliability of some on the plants.

Imported fuel consignment

It said government’s procurement of some 400,000 barrels of crude oil for the dual thermal plants was helpful.

“The excuses with unavailability of fuel have become too many largely because planning to exploit the advantage of dual fuel plants has been abysmal.

“The problem with FPSO Kwame Nkrumah should send the signal that domestic source of gas will not provide the needed supply security. This is why the failure to mention progress made on the proposed LNG projects is worrying.”