Challenges to investment
During Ghana’s energy crisis in 2011-2016, Ghana’s government signed 43 power purchase agreements (PPAs), in hopes of resolving electricity shortages. However, as the new government began its term in 2017, it found that these PPA contracts exceeded the country's power needs. As excess capacity rose, the Ministry of Finance was forced to pay for the unused electricity, amounting to over $600 million by 2019. Despite previous debt relief, Ghana struggled with about $30 billion in external debt, including USD 2.7 billion tied to the energy sector which had the potential to reach USD 12 billion by 2030 if left unaddressed. The fiscal burden prompted the government to terminate numerous contracts and seek renegotiations. Beyond contract renegotiation, however, the government still had to develop a more accountable approach to PPA contracting, in order to resolve transparency issues which had caused the overcapacity, weakened sector planning, and increased fiscal deficits.
Approach
Ghana’s utility regulator, the Public Utilities Regulatory Commission (PURC), launched a public register of PPAs to share information on all Ghana’s active electricity contracts, encompassing both renewable and non-renewable power projects. The registry’s details closely aligned with recommendations developed by the Energy for Growth Hub and the Institute of Economic Affairs (IEA) Ghana. The public PPA register aimed to enhance transparency, generate market competition, improve planning, and provide governance for the electricity sector.
Key Enabling Conditions
To complement the efforts to increase transparency with the public PPA register, the Ghanaian government undertook additional measures to enhance transparency of future PPAs, including the introduction of competitive tendering procedures. To implement these new tenders, the government leveraged resources from the Energy Sector Recovery Programme (ESRP) and the World Bank-supported Energy Sector Transformation Initiative Project (GESTIP). The Ministry of Energy also formulated a Policy Guidance for Least Cost Fuel Procurement and a Policy for Competitive Procurement of Energy Supply and Services Contracts. These policies required electricity procurement to synchronize with government demand and supply projections, while also ensuring that capacity additions were subject to open competition.
Impact / Outcomes
The public PPA register encompassed 14 energy projects (most being signed in 2016), including 11 non-renewable energy projects and 3 renewable energy projects. Two of the RE projects were solar photovoltaic projects in Winneba (signed in June 2013 and December 2015) generating a combined 40 MW capacity. The register launch upgraded Ghana’s ranking in terms of transparency according to PPA Watch, an initiative of the Energy for Growth Hub. Ghana continues to evaluate the programme and experts have assessed three possible improvements for the next version of the register: (i) the Ghanaian parliament could improve oversight and pass laws to require disclosure of PPAs of public interest, (ii) the Ministry of Energy could publish all future electricity contracts within a year of the completion of the financing, and (iii) the Ministry of Finance could mandate that any future PPA with a government guarantee be publicly announced.
Additional Sources
- Ackah, I., Auth, K., Kwakye, J., Moss, T. (2021). A Case Study of Ghana’s Power Purchase Agreements, https://energyforgrowth.org/wp-content/uploads/2021/03/A-Case-Study-of-Ghanas-Power-Purchase-Agreements.pdf
- https://energyforgrowth.org/article/the-latest-power-supply-challenges-in-ghana/
- https://energyforgrowth.org/press/the-other-hidden-debt-how-power-contract-transparency-can-help-prevent-future-debt-risk/
- https://energyforgrowth.org/project/contract-transparency/
- https://energyforgrowth.org/wp-content/uploads/2021/03/Ghana-PPAs-Annex-Table-3.pdf
- https://enveurope.springeropen.com/articles/10.1186/s12302-023-00732-5