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Ghana has to Pay for Power it Can’t Sell, Plunging the Energy Utilities into Debt

Ghana reformed its electricity sector by the book but has lurched from blackouts between 2012 and 2015 to a glut of energy which costs government about 5% of GDP. Fitch ranks the energy sector as the biggest driver of national debt. How did this happen? Ghana is not alone in reforming its electricity sector as it was a key requirement of the “good governance agenda” of the 1990s, nor is it the only country where reforms have caused crises. Rwanda and Mozambique are other examples. Ghana introduced independent power producers in 1998, adding to its state-owned utilities. It also created two regulatory bodies. They are the Energy Commission, which licenses independent power producers and advises government, and the Public Utilities Regulatory Commission, which approves power purchase agreements and sets tariffs. But these mainstream “solutions” didn’t work. This crisis of shortage was quickly replaced with one of overabundance. Ghana went into a power plant construction overdrive, resulting in generation capacity equalling twice the country’s demand by 2018. The installed capacity, according to the Energy Commission of Ghana, is 5,083MW, almost double the peak demand of 2,700MW.