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Power Generation opened to Independent Power Producers

Challenges to investment 

In 2010, Ghana set a target for modern renewable energy (RE) to contribute 10% to the country’s energy generation mix by 2020. At that time, the country relied primarily on a fragile hydropower system, along with oil and gas. Supply deficits led to frequent shortages and blackouts. To achieve energy security and resilience, Ghana intended to increase its generation capacity by diversifying sources, including renewable energies such as solar, wind and hydro. The energy sector in Ghana comprised three segments: transmission, distribution, and generation. In the generation sector, state-owned entities Volta River Authority (VRA) and Bui Power Authority (BPA) held dominant positions, while Independent Power Producers (IPPs) could also generate electricity in theory. However, private investments in RE generation faced a difficult investment climate characterized by high commercial rates, limited tenor loans, high inflation and currency volatility. Additionally, Ghana lacked the technical capacity and personnel to construct, operate, manage and maintain RE initiatives, as well as a regulatory framework to govern them. Last, Ghana’s energy sector entities, financiers and domestic investors lacked the experience to envision, fund and execute RE projects. 

 

Approach 

Among several energy policies and programs, Ghana's primary legislation governing the RE sector was the Renewable Energy Act (Act 832). Enacted in 2011, the RE Act provided both the legal and regulatory framework for achieving RE targets and diversifying energy supply. The RE Act included specific measures to increase the use of RE in Ghana. These measures comprised a Feed-in-Tariff scheme for RE, RE purchase obligations, licensing procedures for commercial activities in RE, and the establishment of the Renewable Energy Authority. One key goal of these measures was to create a more attractive environment for private sector investment in RE. 

The RE Act specifically addressed Independent Power Producers (IPPs) for RE. Although power sector reforms in 1994 had permitted private sector engagements, resulting in the establishment of the first two IPPs in 1997 and 2010, these reforms did not provide a framework that was specific for RE IPPs. 


Key Enabling Conditions 

A combination of strong policy commitments by Ghana’s government and external support for regulatory matters, particularly through international initiatives like Power Africa, spurred RE deployment and positively influenced investors’ perception of risk. Ghana also benefitted from additional energy-sector assistance from other programs such as the Scaling-up Renewable Energy Program in Ghana, via the African Development Bank (AfDB) and the International Finance Corporation (IFC). These external partners and initiatives aligned with Ghana’s national priorities, enhancing the technical, financial, regulatory, and institutional capacity of the energy sector and RE in particular.  

 

Impact / Outcomes

As of 2021, RE generation in Ghana reached 152 GWh. The sources included three state-owned solar farms producing around 98 GWh (VRA Navrongo, Kaleo/Lawra, Bui Solar Farm) and three IPPs generating roughly 57 GWh (BxC Solar, Meinergy, and Safi Sana). Despite these contributions, the overall development experienced a shortfall versus the national energy target. The share of RE in the energy generation mix was 1% in 2017 and increased marginally to 2% in 2018. Consequently, the original target of 10% by 2020 was adjusted to 2030. 

In April 2023, Ghana lifted its moratorium, in place since 2020, on issuing wholesale electricity supply licenses for RE embedded generation projects. Companies in the industry are now allowed to apply for licenses to develop RE generation projects for private and personal use. 


Additional Sources

Locations
Africa, Ghana
Year published
01 January 2011
Policy type
Energy policy
Policy lever
Power market governance
Risk category
Political risk, Policy and regulatory risk, Technology risk, Counterparty risk, Currency/macroeconomic risk, Financial sector risk, Permits risk, Power market risk

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