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Solar to play key role in Ghana's US$230 million renewable energy program

2016-06-09 00:11:10 Prostar Solar Energy Read

The Ghanaian Government is looking to strengthen its renewable energy industry. A total of US$230 million has been earmarked for the scale-up, which is expected to see solar PV play a significant role. Financing will come from a number of sources. The country's investment climate has attracted criticism, however.

According to the Scaling-up Renewable Energy Program (SREP) Investment Plan for Ghana, the country’s energy needs are heavily reliant on biomass, oil and hydropower. Of the 3 GW of current energy capacity, hydropower comprises 54%, while other renewables account for just 0.3%. However, with energy demands increasing by an average of 10% annually, the government estimates the country will need to increase production to around 4.2 GW by 2026.

And, while 70% of the country’s population is said to have access to electricity, the remaining 30%, totaling around 5 million, are living in relatively inaccessible areas. As such, off-grid and mini-grid options will present the best technological options for reaching them, which is good news for solar PV in particular. A lack of understanding of the technology, which has led some communities to question the advantages of decentralized power, will need to be addressed, however, to ensure their success.

A total of $230 million will be invested into four project areas: (i) renewable energy mini-grids and stand-alone solar PV systems; (ii) solar PV-based net metering with storage; (iii) utility-scale solar PV/wind power generation; and (iv) a technical assistance project.

Funds will come from the Government of Ghana (GoG), the Climate Investment Funds (CIF), the African Development Bank (AfDB), the Sustainable Energy Fund for Africa (SEFA), the International Finance Corporation (IFC), and a number of unidentified development partners (DPs), and private financiers and beneficiaries (PI&Bs). See the table below for a cost breakdown across the projects:

SREP Program Financing Plan (USD million)

Project

SREP

GoG

AfDB

IFC

DPs

PI&B

Total

RE mini-grids and stand-alone solar PV systems

17.5

8

27

-

12

18.5

83

Solar PV-based net metering with storage

12.5

8

15

-

12

45.5

93

Utility-scale solar PV/wind power generation

10

-

10

10

-

20

50

Technical assistance

-

-

1.5

-

2.5

-

4

Total

40

16

53.5

10

26.5

84

230

Taken from Program for Scaling Up Renewable Energy in Low Income Countries (SREP)

Under its renewable energy plans – universal access to electricity by 2016 and 10% renewables by 2020 –  the Ghanaian government aims to deploy around 30,000 solar home systems and two million solar lanterns by 2020. Meanwhile, the energy commission has issued licenses and permits to utility-scale solar projects totaling 1.835 GW, and a construction permit for a 20 MW project.

"The financing required to harness this potential in order for the country to become an 'energy economy' … is substantial. The Scaling-up Renewable Energy Program  in Ghana Investment Plan (SREP-Ghana IP) is therefore key to the  Government’s strategy aimed at unlocking financing opportunities to  accelerate the development of a sustainable renewable energy sector," commented Kwabena Donkor, Minister, Ministry of Power.

By the end of 2014, it was reported that 38,200 solar systems and lanterns had been deployed across 120 communities, in addition to 25 grid connected systems totaling 8 MW. Overall, Ghana’s solar irradiation levels range between 4.5 to 6.0 kWh/m2/day. The highest levels are found in the northern half of the country.

Solar criticism

Inadequate tariff frameworks, a challenging investment climate, limited technological capacity and a lack of renewable energy experience are among the factors said to be currently hindering renewable energy implementation in Ghana.

"The Ministry of Power (MoP) is working with the Public Utility Regulatory Commission (PURC) and the Energy Commission to develop the regulatory framework for mini-grids and stand-alone electrification interventions," stated SREP's investment report. "Nevertheless," it continued, "significant barriers with respect to financing, regulatory and in-house capacity exist, impeding the ability to fully harness the country’s renewable energy potential."

The government is said to be taking strides to reduce them. For instance, the Renewable Energy Act 2011 aimed to provide a stable climate in which to invest, and introduced feed-in tariffs. As of October 1, 2014, the rates for solar PV systems with grid stability systems are 64.4 GHp/kWh and for systems without grid stability systems, 58.4 GHp/kWh.

The report continues, "Despite the fact that these RE-FiT are among the highest in recent times, the RE sector is still not attracting the desired level of investments due to the poor financial standing of the country’s primary power purchasing utility, the Electricity Company of Ghana (ECG). The GoG’s decision not to provide risk mitigation support further increases investors’ perceived risk. Finally, the RE-FiT is yet to be contracted and paid to an operational RE project almost 2 years after its first introduction."

The Ghana Energy Commission announced this February that it had unveiled plans to create a market for solar power production in an effort to secure a more efficient energy source. These included asking parliament to approve specific incentives, including tax credits, that could prove attractive for solar energy production and purchasing. No updated information was available on this, however.


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