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The emergence of renewables into the current Ghanaian market structure is proving a real challenge for the existing legislature, according to Francisca Kusi-Appiah, a lecturer at the University of Professional Studies, Accra and a consultant at K-App Law firm.

This article first appeared in ESI Africa Edition 5, 2018. You can read the magazine’s articles here or subscribe here to receive a print copy. 

The government of Ghana has identified the renewable energy market as a healthy and fruitful sector on which to focus its resources, policy and reform. As part of its renewable energy investment drive, government put in place several policies and regulatory measures including the Renewable Energy Act 2011 (Act 832); however, this Act is incapable of dealing with offgrid regulation.

Dealing with this issue is inevitable for governmental bodies as the prosumer, who is self-generating, will be willing and able to sell surplus to the grid – but this needs to be supported by a robust regulatory framework.

Even with Ghana’s market structure reform, which started in 1997, state-owned enterprises dominate the market and this creates a regulatory challenge. As the energy regulator is a state body, Kusi-Appiah stresses that this poses a problem in terms of who regulates other state-owned enterprises, such as Ghana’s power utility the Electricity Company of Ghana. However, with the recent introduction and increased uptake of independent power producers (IPPs), the regulatory process has become “easier” to manage.

Another challenge that is apparent for investors is that of rates. Government is working to ensure that the public service obligation is being carried out and investors also need to charge rates to recoup their investment. Therefore, the regulator often struggles to strike a balance between ensuring affordable supply of electricity and at the same time ensuring that investors reap from their investments.

With regard to sector coupling, Ghana is warming up to this but is slow in its adoption compared to other countries such as East Africa’s Tanzania, who recently announced a project to shift toward natural gas-powered buses on its rapid transit routes in Dar es Salaam. With Ghana’s geography naturally being a hot and humid climate, opportunities surface in the manufacturing of cooling equipment for large power users; and real estate and transportation is optimistic about the entrance of electric vehicles within the next 20 years.

Kusi-Appiah is confident that Ghana currently has one of the best market conditions to support investment and entertain investor interest. Kusi-Appiah justifies this by noting the Ghana Investment Promotion Centre – which facilitates investments in all sectors except mining and petroleum which are handled by the Ghana Chamber of Mines and the Ghana Petroleum Commission – is a “one-stop-shop” for foreign investors entering the local market economy. By registering with this centre, investors are exposed to opportunities that would not have otherwise been accessible to them; a typical one being under the Free Zone Act.

A foreign investor can access incentives such as a 10-year tax free holiday; however, with renewables a hot area for the west African country in terms of business opportunities, Kusi-Appiah notes that investors can access the feed-in-tariffs which are valid for a 10-year period. From a legal perspective, in terms of expropriation and nationalisation, which is unlikely, investors can be assured that compensation will be paid if faced with this situation.

An example of sector investor confidence, in September 2018 the African Development Bank approved a $1.5 million grant from its Sustainable Energy Fund for Africa (SEFA) to assist Ghana’s renewable energy investment drive. According to the Bank, the grant will support the government’s efforts to overcome technical, financial, regulatory and institutional barriers to scaling-up renewable energy investments in the country. The project, which is part of the Bank-led Climate Investment Fund (CIF) and the Scaling-up Renewable Energy Programme (SREP) Investment Plan for Ghana, will complement the bank’s effort in the Ghana Energy Development and Access Programme (GEDAP).

As part of the on-going market reforms, the Electricity Company of Ghana, the main state-owned distribution company, recently signed a public-private partnership agreement with the Manila Electric Company (Meralco) and this will take effect from February 2019. ESI

This article first appeared in ESI Africa Edition 5, 2018. You can read the magazine’s articles here or subscribe here to receive a print copy.