Govt saves US$6.8bn in reviewing PPAs

A committee set up by the Energy Ministry, to review all Power Purchase Agreements (PPAs) signed by the ECG from 2018 till 2030, has saved some US$6.8 billion for the state.

Energy Minister, John Peter Amewu explained that the over-contracting of capacity has imposed serious financial and legal obligations on government and power consumers.

Out of the 30 PPAs signed by the Electricity Company of Ghana for conventional thermal power projects, the committee reviewed 26 of the agreements with a combined capacity of 7,838MW.

Four of the projects were not reviewed because they are already operational.

An estimated cost for the termination is US$402.39 million, compared to an average annual capacity cost of US$586 million each year or a cumulative cost of US$7.217 billion from 2018 to 2030.

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

Recommendations

The assessment recommended that, eight of the PPAs with combined capacity of 2070MW are to proceed without modification; four PPAs with a combined capacity of 1,810MW be deferred to 2018-2025; three PPAs with a capacity of 1,150MW be deferred beyond 2025 and 11 of them, with a combined capacity of 2,808MW be terminated.

Energy Minister

Energy Minister, John Peter Amewu explained that, pursuant to the review exercise, government has made significant savings from the deferment and termination of the reviewed PPAs.

Energy Minister, John Peter Amewu

The Minister however said, the PPAs, in addition to the existing generating capacities from hydro, the VRA plants at Aboadze and Tema including the TICO plant will result in a total capacity of about 11,000MW.

“This will by far be more than the current peak demand of 2400MW. Even at an annual growth in demand of 10 percent, Ghana will not be able to utilize this capacity in two decades”, Mr. Amewu indicated.

By Wisdom Jonny-Nuekpe