Special Report Africa: Ghana20. November 2013 | Features, Global PV markets, Markets & Trends, Trade show | By: Edgar Meza
Ulrike Brückner of the German law firm Rödl & Partner discusses the state of Ghana's burgeoning solar market, including investment opportunities and government efforts to attract foreign investment.
pv magazine: What is driving solar PV development in Ghana, government support or private investment?
Brückner: It is both – government support and private investment. A lack of electricity and frequent power cuts prompted the government to action. For that reason they developed the plan to generate more electricity with a 10% proportion of renewable energy until 2020. The implementation of these goals could not be done without private investment. The renewable energy aim shall be achieved through the contributions of IPPs [independent power producers].
As a first step the government established a legal framework (the Renewable Energy Act) to ensure and enable investments regarding PV. The latest step was to publish Feed-In-Tariffs on August 28, 2013.
pv magazine: What kinds of incentives are available and are utilities playing a role?
Brückner: The utilities that are playing a vital role in the country are the Volta River Authority and the Electricity Company of Ghana as the national electricity providers; the GridCo, which is the national company responsible for the grid; and also the Public Utilities Regulatory Commission (PURC) and the Electricity Commission as the main regulatory bodies under the supervision of the Ministry of Energy.
PURC recently released the long awaited Feed-In-Tariffs for Ghana. The tariffs are a vital step towards attracting IPPs and producing more energy in the country. The introduction of the Renewable Energy Act, however, is another positive sign for potential investors as it creates an environment of legal certainty for the development of the new sector.
Furthermore, Ghana is putting other frameworks of measures and incentives in place which have to be evaluated by each investor individually, taking into account the concrete details of the envisaged project.
There are tax incentives on solar sets and rotary converters as well as diverse subsidies under the Renewable Energy Fund (established through the Renewable Energy Act), which are available particularly for projects that target on rural electrification. GEDAP, which is financed amongst others by the Ministry of Energy, the World Bank and the African Development Bank, is another initiative offering subsidies for certain projects. The Electricity Access and Renewable Energy Component of the government, which has a pool of €125 million available, is particularly tailored to improve the market conditions for IPP.
pv magazine: Who are the major international solar players currently doing business in Ghana?
Brückner: The national Volta River Authority is still the major player in electricity production in Ghana. But there have been changes since the energy reform in 1997. A handful of IPPs have established businesses in Ghana since 2008.
Mere Power Nzema Ltd., a subsidiary of Blue Energy, is currently planning the biggest photovoltaic solar energy plant in Ghana, the Nzema project. The company has been granted a 100-year lease on the site and permission to connect to the Ghanaian power grid. The installation of more than 630,000 solar PV modules will begin by the end of 2013. Electricity generation will start early next year, with sections coming on stream as they are completed. The project is due to reach full capacity by October 2015.
Ghana then will be able to provide electricity to more than 100,000 homes. The 155 MW plant will increase Ghana's electricity generating capacity by 6%.
pv magazine: How does the solar market in Ghana compare to other African markets?
Brückner: Ghana is deemed to be one of the most attractive markets in Western Africa because of its growing economy and the investment-friendly business climate. The country is one of the top-ten fastest growing economies in the world, the fastest growing economy in Africa and has a stable political environment.
For the solar industry Ghana is particularly interesting because of its excellent insolation conditions. The average insolation in Ghana is about 4.4 to 5.6 kilowatts per square meter a day with a sunshine duration between 1,800 and 3,000 hours a year.
This potential goes along with a substantive lack of power generation: The demand for electricity in Ghana increased by 6 % during the last 10 years and shall increase by 7% within the next 10 years. The urgent need of energy is common to most developing countries in Africa. However, Ghana stands out in so far as the government figures claim that 72% of the population indeed has access to electricity, though this could be an optimistic figure. Current megawatt capacity is just under 2,500, but energy officials hope to bring it up to 5,000 within the next few years – with the support of IPPs.
Compared to other African markets, Ghana is among the leading countries with its initiatives towards the implementation of renewable energy generation, as it already took the first steps to open its market for IPP and has set the conditions for the sector in the Renewable Energy Act.
In contrast to South Africa, which also has a forward-thinking energy policy (however, without having a legal framework enacted!), Ghana is e.g. currently operating net-metering.
Unlike many other solar projects in Africa that use the cheaper photovoltaic technology, the Nzwma project will use concentrated solar power technology. However, so far there are only small solar panel installations already existing in rural areas that lack access to the grid.
The end-consumer tariff rose from €0.591 per kilowatt hour in 2009 up to €0.977 per kilowatt hour in 2011. This increase of approximately 31 % within the last ten years is also due to the great instability of energy supplies.
Last but not least, this relatively high tariff makes Ghana more attractive for renewable energy generation than some other African markets.
pv magazine: What, if any, are the current solar projections for the country in terms of planned installations?
Brückner: Under the Volta River Authority's Renewable Energy Development Program, one of the goals of Phase 1 is it to develop a total of 10 MW PV installations in Northern Ghana. Furthermore, there are feasibility studies under way for CSP in the northern regions. The PV plants shall be located in Kaleo (4 MW), Jirapa (2 MW), Lawra (2 MW), and Navrongo (2 MW). For Navrongo, the EPC [engineering, procurement and construction] contract was awarded to China Wind Power and the construction commenced on March 15, 2012.
With regards to the other three sites, the tenders still need some specifications, which were published at the end of 2012. The complete 10 MW installations shall be commissioned by the end of 2013.
pv magazine: What are the major problems and obstacles facing solar development in the region?
Brückner: Initial costs for solar projects in Ghana can be difficult to predict. Though prices for components are decreasing, solar panel installation is still more expensive than other options. Diesel engines, for instance, remain a popular choice for small-scale power generation.
The major challenge in the Ghanaian energy market, however, is to finance the projects. Especially mid-size businesses could profit substantially through self-consumption PV-plants, but they will find it hard to get the required financing. Interest rates at Ghanaian banks are extremely high, currently 22% to 30% per year.
Furthermore, ownership of the targeted property as a key element for the implementation of a solar project is often uncertain or even unknown.
German law firm Rödl & Partner has offices in South Africa and has advised renewable energy project devlopers in Ghana.
Ulrike Brückner will discuss Ghana's solar market at the 14th Forum Solarpraxis on Nov. 22 at the Hilton Hotel Berlin. The Forum Solarpraxis runs Nov. 21-22.
Choose between a digital and print subscription from pv magazine publisher Solarpraxis AG’s online shop!
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