In the face of the global energy transition and rising demand for renewable sources, Ghana is raising $562bn in investments over the next five decades to decarbonise its energy sector through major projects. Analysts say this campaign will be successful only if the government woos the private sector with a favourable fiscal regime.
At COP27 in Egypt last year, President Nana Akufo-Addo made a strong case for renewable energy in Africa. He gave assurances of increasing the share of clean sources in Ghana’s energy mix as part of the broader national framework for a transition to environmentally friendly power generation.
“We will continue to increase the share of renewable energy in our electricity generation mix, as well as explore the options of hydrogen gas and other clean energy sources to meet our energy needs,” he said.
“Energy transition has become a global responsibility for us all, especially in view of the impact of climate change, and the global energy crisis brought forth by the Russian invasion of Ukraine.”
Back home, however, the government’s renewable energy investments have not matched up to its aspirations, with analysts pointing to a vast opportunity for the private sector to step in.
Solar, wind, mini-hydro, and waste to energy systems comprise promising potential for investors in Ghana.
These clean energy sources were expected to represent 10% of the power generation in the West African nation by 2020, and yet they constituted about a mere 2%.
2070 agenda
The new renewable energy master plan sets a new deadline of 2030 for the 10% target and 20% by 2070.
By 2070, the government aims for:
• Electricity generation capacity requirement to move from 5,392MW in 2020 to 84,308MW
• Nuclear power to become predominant in Ghana’s energy mix
• Solar and wind energy to contribute 20% of installed generation capacity
• The deputy director of renewable and nuclear energy at the ministry of energy, Robert Bright Mawuko Sogbadji, told journalists in Accra that the goals are realistic and highly prioritised by the government.
• To achieve these targets, it mustn’t be “business as usual”, says Alex Ampaabeng, senior economic analyst at the Natural Resource Governance Institute.
Lithium laws
Ampaabeng tells The Africa Report that the discovery of lithium – critical for producing rechargeable batteries – requires new laws to regulate exploration of relevant minerals while incentivising private investors.
“Ghana has lithium and manganese, which the world needs for this global energy transition, […] so we must not operate a business-as-usual model,” he says. “We need to pass a critical minerals law to make sure that [the] government gets the right revenues from these minerals.
“The law must also deal with issues of ownership and specifically local content. It should also regulate […] exploration so that the country is not reduced to just a producer [as it is also] a processor.”
Australia-based Atlantic Lithium has already received the green light to build Ghana’s first lithium mine in 2024.
$562bn investments
In order for Ghana to achieve net zero emissions – moving away from fossil fuels by 2070 – the country will need a total of $561.8bn worth of investments, according to the Energy Transition Framework.
Besides funds from development partners, the government is looking to private investors.
“The government’s financial handicaps make it difficult for it to take up causes with significant financial implications, such as achieving net zero targets, and that is why the private sector’s role in driving renewable energy is crucial,” policy analyst at the Institute for Energy Securities Raymond Nuworkpor tells The Africa Report.
For a successful partnership, he suggests the creation of a supportive business environment for investors, citing the removal of elements that drive high financing costs of renewable energy projects. “Giving more targeted tax exemptions can encourage private investors to do more.”
Since November 2019, the government of Ghana has placed a moratorium on signing new contracts in the energy sector, prohibiting its agencies in the sector from entering into new agreements until further notice.
This means that there is no potential for private sector participation in on-grid renewable energy projects, which has created an attraction for off-grid systems used by residential and commercial facilities.
Leading the way
Ghana’s second-largest state power generation company, Bui Power Authority, has already taken an ambitious step by building West Africa’s first hybrid hydro-solar plant of 250MW. The first 50MW of the project has been completed and is fed into the national grid.
As off-grid solar systems continue to get popular, more private people seeking cheaper and greener sources of power are setting up solar plants for their homes and businesses.
On one of Ghana’s prime lands in Accra sits CAL Bank’s 12-storey headquarters, which is powered by a 500KW solar farm well-set on its compound. The building is arguably the capital’s greenest facility.
Ghana Chamber of Mines also inaugurated its 84KW peak power solar photovoltaic system last month. The $122,300 system will now power the commission’s office complex and is expected to cut their monthly on-grid electricity spending by about 75%.
While commissioning the project, chief executive officer Sulemanu Koney called for all taxes on equipment imported for the use of renewable energy projects to be removed.
“The ecosystem that is required to encourage households and firms to invest in clean energy is still in an inchoate stage… While the government has exempted imported solar panels from VAT and other levies, the payments for completed projects [pre-assembled solar systems] are still subject to these statutory taxes and levies,” Koney told reporters.
Nuworkpor from the Institute for Energy Securities believes Ghana must seize the political and economic momentum presented by the global energy transition as interest in crude wanes and support private sector participation.
“Policy de-risking instruments favourable to renewable energy projects should be the primary action as they offer great incentives for renewable energy investments.”
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This article is authored by Jonas Nyabor. He is a Ghanaian journalist and fact-checker. This article was first published on The Africa Report.