CAPE TOWN, South Africa, July 13 --
Robust demand for power in Ghana is leading to power shortages and placing
enormous pressure on existing power generation facilities. In response, the
government has opened up the industry to the private sector to support
investments in new generation facilities.
New analysis from Frost Sullivan (http://www.energy.frost.com), Strategic
Analysis of the Ghanaian Electricity Industry, finds that the industry earned
revenues of US$287.00 million in 2007 and estimates this to reach US$419.00
million in 2014.
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The booming mining and smelting industry in Ghana is driving the demand for
more power, notes Frost Sullivan Industry Analyst Jeannot Boussougouth. By
2014, the country will require an additional electricity generation capacity of
2000MW to meet growing power requirements.
The government of Ghana has embarked on a number of significant initiatives to
build a reliable power sector to sustain the country’s growing economy.
The power sector has been unbundled to create an environment conducive for
private sector investment.
The private sector is being encouraged to diversify into thermal power and
enter into power purchase agreements directly with bulk power end users such as
mining companies, Boussougouth says. This deregulation of the energy market will
result in cost-reflective tariffs and higher returns on investment for private
Over four independent power producers (IPPs) are already at different stages of
power plant construction in Ghana. Approximately 1600MW of additional generation
capacity is already under construction and is expected online in the
short-to-medium term future.
However, the prevailing low tariffs are an important restraint to the growth of
the power sector since it discourages major investment from IPPs. Moreover, the
government’s existing hydropower plants are now old and characterised by
frequent breakdowns and low availability, resulting in severe power shortages.
Ghana’s current low tariffs and the delays in establishing a sustainable
tariff regime are discouraging many potential power sector investors, cautions
Boussougouth. The current tariff regime is heavily influenced by hydropower and
is not attractive to IPPs that are generating power from expensive imported oil.
IPPs investing in the Ghanaian power sector should focus on operating in the
deregulated market, where project developers are allowed to enter into power
purchase agreements directly with bulk power end-users with mutually agreeable
tariff structures. However, the Ghanaian government needs to urgently create
enabling legislation for the smooth operation of this deregulated energy market.
IPPs operating in Ghana need to find a secure source of cheaper fuel to cushion
themselves from the prevailing low tariff, advises Boussougouth. The focus
should be on developing hydropower projects, which have very low production
costs as compared to expensive imported oil.
Strategic Analysis of the Ghanaian Electricity Industry is part of the Energy
Power Growth Partnership Service programme, which also includes research in the
following markets: Strategic Analysis of the Ugandan Electricity Industry,
Strategic Analysis of the Cameroonian Electricity Industry, Strategic Analysis
of the DRC Electricity Industry, Investment Opportunities for IPPs in West
Africa and, Investment Opportunities for IPPs in East Africa. All research
services included in subscriptions provide detailed market opportunities and
industry trends that have been evaluated following extensive interviews with
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Strategic Analysis of the Ghanaian Electricity Industry M36F Contact: Patrick
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