Ghana’s Cenpower Generation has committed to switching its primary fuel consumption from light crude oil to natural gas.
Ghana National Petroleum Corp. (GNPC) has agreed to supply the gas and supplies are expected to start by the end of the week. Cenpower’s switch to gas will cut its cost of generation, with savings being passed on to Ghana.
The government has said it may save up to $3 billion over the remaining term of the power purchase agreement (PPA), which will run for 19 years.
Cenpower provides around 10% of Ghana’s total generation. Switching to gas will save money and will also have environment benefits.
The government will also be able to reduce pressure stemming from the import of liquid fuel, in its shift to locally sourced gas.
Ghana has said it pays more than $500 million per year for unused electricity. The government has blamed the previous administration for signing long-term agreements at a time of crisis, in an “uncoordinated and short-sighted attempt to end dumsor”. These deals set out uncompetitive tariffs, the statement said. These have seen debt build up in the sector.
The country is working with the World Bank to shift to a more viable model. They set up the Energy Sector Recovery Programme (ESRP), which runs until 2023. This also sets the stage for competitive bidding for future additional capacity.
Ghana is negotiating with power suppliers to secure better terms. The government announced a deal with Cenit Power in September. This agreement should allow Ghana to save $200mn. This comes through a shift to a tolling structure and a reduction in the capital recovery tariff.
Ghanaian Minister of Finance Ken Ofori-Atta said Cenpower’s switch to gas was a “significant step in helping regenerate Ghana’s energy sector. In recent weeks, there has been increased momentum under the ESRP Consultation Process towards resolving some extremely challenging legacy issues inherited from the previous administration.”
Ofori-Atta called on other power suppliers to engage in negotiations with the government.