Dumsor: How the Akufo-Addo gov’t Saved Ghana over $7bn

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Gabby Asare Otchere Darko writes

The NPP has saved Ghana over $7bn that we otherwise would have paid because John Mahama decides to sign us on for power we had to pay for even though we would never get to use!
Below are the facts on the financial and legal burdens NPP inherited as a result of NDC’s strange decision to agree to over 7,000 of excess capacity contracts:
As at the end of 2016, ECG had signed 14 Power Purchase Agreements (PPA) which were operational with combined capacity of 1104MW. Another 18 PPAs signed by ECG with a combined capacity of about 6,000MW and 8 PPAs were under discussions with total capacity of 2116MW.

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This in addition to existing generation capacity from hydro, the VRA plants at Aboadzi and Tema; and the TICO plant will result in a total installed capacity of about 11,000MW if the committed capacity are all deployed. This will by far be more than the current peak demand of 2400MW. Even at an annual growth in demand of 10%, our country will not be able to utilize this capacity in two decades.

The over-contracting of capacity imposed serious financial and legal obligations on government and power consumers.

To address these, the Ministry of Energy tasked a Committee led by the Energy Commission to review all PPAs signed by the Electricity Company of Ghana (ECG) for conventional thermal power projects. The Committee reviewed 26 out of 30 PPAs ECG had initiated. The other 4 were not reviewed because they were already operational. The combined generation capacity of the 26 PPAs reviewed amounted to 7,838MW.

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The review noted that the projected capacity additions from the PPAs were far in excess of the required additions inclusive of a 20% system reserve margin from 2018 to 2030 and would result in the payment of capacity charges for the dispatched plants. The review recommended that:

I. 8 PPAs with combined capacity of 2070 are to proceed without modification;
II. 4 PPAs with a combined capacity of 1,810MW be deferred to 2018-2025;
III. 3 PPAs with a combined capacity of 1,150MW be deferred beyond 2025; and
IIII. 11 PPAs with a combined capacity of 2,808MW be terminated.

Pursuant to the review exercise, Government stands to make significant savings from the deferment and/or termination of the reviewed PPAs. The estimated cost for the termination is $402.39 million, compared to an average annual capacity cost of USD 586 million each year or a cumulative cost of $7.217 billion from 2018 to 2030. This yields an estimated saving of $6.8 billion over the 13 year period.

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*These are the facts.*

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