The Institute for Energy Security (IES) has criticised mismanagement of the Energy Sector Recovery Levy (ESLA), warning that its collateralisation has left the energy sector burdened with over US$2billion in debt after eight years.

This, according to IES, raises questions about accountability and justification for the collateralisation, since the levy has been generating some US$650million annually to clear legacy debts and stabilise the sector.

In a statement to the B&FT, IES said the country’s installed generation capacity stood at 4,599MW, with a dependable capacity of 4,127MW serving a peak demand of 2,078MW as of December 2016.

The Institute explained that while power generation capacity increased to 5,639MW by the end of 2023, demand growth – which reached 3,618MW – has been accompanied by significant generation deficits and frequent outages. This, it noted, highlights inefficiencies in capacity utilisation and planning.

The IES described this as a missed opportunity for the country, attributing the power sector’s deteriorating state to poor management over the past eight years despite inheriting substantial resources and opportunities.

“The sector, which was on a trajectory of recovery and growth,” the IES noted, “has suffered significant setbacks.”

The sector plays a critical role in driving the nation’s economy and improving citizens’ lives – but is now beleaguered with operational and financial inefficiencies, mounting debts, mismanagement, diminishing public confidence and questionable choices, the statement noted.

Urgent action

IES urged government to act urgently in addressing the crisis and ensuring reliable, affordable and sustainable energy for all.

It insisted that the Asogli Power Plant’s restoration alone is insufficient to address ongoing power outages.

The combined shortfall from non-operational plants and systemic inefficiencies within the sector, the Institute explained, mean that outages will persist unless underlying issues are resolved.

“A comprehensive strategy addressing generation, distribution and financial management is essential to achieving long-term stability and reliability in Ghana’s power sector,” the statement noted.

Restoration of Asogli not enough

Though restoration of the 550 MW Asogli Power Plant is positive, IES noted this move is a partial step in addressing the current power crisis. While it alleviates some immediate pressure on the grid, it is not sufficient to resolve the systemic power outages entirely.

The remaining unutilised capacity (approximately 850MW) from other plants such as Amandi, Siemens and Karpower means that the power sector remains vulnerable to deficits, particularly during peak demand periods.

The think-tank also lamented government’s approach in settling financial commitments to power generators, arguing that the payment to Asogli after it shut down demonstrates government’s reactive approach rather than a strategic, long-term solution to financial constraints facing IPPs.

Recommendations

To address the looming power crisis, IES is demanding the immediate resolution of all arrears owed independent power producers.

IES warned that failure to clear the arrears could lead to prolonged power outages and significant economic disruptions. Such a scenario, it noted, would erode investor confidence in the energy sector and further compound existing challenges.

Additionally, the Institute urged government to invest in gas infrastructure by expanding gas processing and storage facilities. This, it explained, would maximise the use of domestic gas resources, reduce dependency on imports, lower operational costs and strengthen energy security.

In light of persistent power shortfalls, it recommended implementing a reliable load-shedding schedule. Such a measure, it argued, will help minimise disruptions and enable businesses and households to plan more effectively.