Most of our issues at the energy sector wasn't as technical as John Mahama made us believe. It was mainly financial management issues. When Akufo-Addo appointed Hon. Boakye Agyarko there, we saw how he reviewed PPAs and paid $100m owed to Nigeria's WAPCO in 2018. Amewu doing same
Under JDM, the PPAs were signed on the basis of "take or pay" terms which means once the power has been produced if it is not harvested to the grid, it still has to be paid for. Ghana is currently paying between $25m to $30m dollars monthly as a result of excess capacity.
A government team which analyzed the power sector found that the number of PPAs signed outweighs the generation capacity needed. About 11 PPAs have been put on hold for termination within the framework of the 2600 megawatts generation capacity.
By 2022 to 2023, the government anticipates power demand to increase between 12 to 15% and so PPAs have been deferred to that period.
The cost of excess capacity by end of 2020 is expected to go up to $403m, by 2021 will be $493m. Our high excess capacity charges are worrying.
As we are all aware, most of the previous PPAs under John Mahama were signed through negotiations which did not bring cost value reconciliation compared to the international market and this is what has resulted in high and excess capacity charges we are paying.
It's very good this government has made sure that there will be no more PPAs signed by the Ministry except for renewables.
But even PPAs for renewables is still questionable because if you bring on board a 50 MW renewable plant, it means you have to retire a 50 MW conventional power plant for which you have to pay. Therefore, the addition of renewables then becomes an addition to our capacity charges
"Take and pay" PPAs which are competitively priced should be able to give a capacity charge that will help pay for excess capacity of conventional plants that will be retired. Then automatically such a PPA will be on the grid at the base or peak load.
The government will then set aside and not necessarily cancel the "take or pay" PPAs in order to enable to the "take and pay" plant to be on the national grid.
With this new strategy, if power suppliers don’t agree with this new scenario, their plants will not be used. GoG will only be paying their capacity charges and not variable, and pass through charges which are margins of the power plant’s operational cost.
Under the previous gov't, there was a bit of confusion because some of the PPAs were signed by the Ministry of Energy and others by ECG. But with this current administration, any PPA that will be signed will be renewables and will now be signed by ECG.