The Power Minister, Dr. Kwabena Donkor, has asked power consumers to adopt greater efficiency in energy use in order to contain the increasing cost of power use, as the era of cheap power provision nears its end.
He said in the current energy generation mix the contribution of hydro sources — the cheapest source of energy generation — is diminishing, which requires consumers to brace themselves for a tariff regime that will reflect the cost of power supply.
“If you look at the generation mix, we are going to have less cheap sources of generation and more of the expensive sources of generation, and this must be reflected in an appropriate tariff. As at the moment, this is not yet fairly reflected. So, going forward, Ghanaians must develop greater efficiency in energy use. A household can maintain its present payment obligations by reducing the waste in power use.
“So a behavioural change will also help us to minimise power use, and therefore minimise the impact of electricity-cost on our lives and also reduce the national aggregate demand,” he said.
The comments of Dr. Kwabena Donkor were made in an interview following the recent increases in utility tariffs that have since elicited disapproval from the consuming public.
Last week, the Public Utilities and Regulatory Commission (PURC) announced a 59.2 percent increase in the electricity tariff to help power companies meet the cost of producing and distributing power — which is largely unavailable in the country due to deficiencies in energy supply.
Dr. Kwabena Donkor said despite the increment in power usage, the amount consumers pay for electricity is far below what it costs to produce power, and it is about time the country charts a path for a cost-reflective regime.
“We have not had a cost-reflective tariff for a while because Akosombo has been the dominant in the generation mix; but that has changed drastically. For example, as at today Akosombo is doing about 480megawatts (MW) out of an installed capacity of 1020MW.
“TICO alone is doing 320MW, which is almost close to Akosombo. And therefore Akosombo’s role in the generation mix has diminished.
“Today Akosombo is doing less than 40%. And Akosombo generates at about 1.94 cents per kilowatt hour. The thermals average 13-14 cents. So when you have such a drastic change in the generation mix, the average cost of generation shoots up. And therefore, as the quantum or percentage of generation of Akosombo in the generation mix reduces — and it will continue to reduce, the thermal and other forms of generation will be on the ascendency,” he explained.
Currently, Ghana’s energy supply sources come from hydro generation, thermal generation and solar.
The state-owned Volta River Authority (VRA) produces about 83 percent of the country’s energy needs with the rest taken up by Bui Power Authority — 5 percent — and Independent Power Producers.
It has been argued that the country has failed to attract more investments into the power sector since current tariffs do not provide a sufficiently enticing investment opportunity, as they are not providing robust returns on investment.
The challenge, of course, is to keep tariffs low enough to enable electricity access to the poor, but at the same time provide an attractive return on investment.
Asked what level of tariff for the utility players will be enough to get consumers sufficient power, Dr. Kwabena Donkor said: “Well, a level that reflects their cost and gives them a bit of a margin for future investments.”