guide to electric power in ghana

8/3/2019 Guide to Electric Power in Ghana

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Guide toElectric Powerin GhanaFirst Edition

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RESOURCE CENTER FOR ENERGY ECONOMICS AND REGULATIONINSTITUTE OF STATISTICAL, SOCIAL AND ECONOMIC RESEARCHUNIVERSITY OF GHANA, LEGON

July 2005


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Guide to Electric Power in Ghana

First Edition

RESOURCE CENTER FOR ENERGY ECONOMICS AND REGULATIONInstitute of Statistical, Social and Economic Research

University of GhanaP. O. Box LG 74

Legon, AccraGhana

Telephone: +233-21-512502/512503Fax: +233-21-512504


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Table of Contents

For additional copies of this report contact:

The Co-ordinatorResource Center for Energy Economics and Regulation

Institute of Statistical, Social and Economic ResearchUniversity of Ghana

P. O. Box LG 74Legon, Accra

Ghana

Telephone: +233-21-512502/512503Fax: +233-21-512504


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Outline

1. FACTS ON GHANAS ELECTRIC POWER 11.1 Who uses electricity in Ghana 1

1.2 Electricity and population growth 21.3 Organisations 31.4 Electric power system 31.5 How much does it cost and how much do we pay 51.6 Electric power and Ghanas neighbours 7

2. THE BASICS OF ELECTRIC POWER 92.1 Introduction 92.2 Defining and Measuring 92.3 Generating Electricity 112.4 Transmission and Distribution 112.5 Transmission Constraints 12

2.6 Distribution 132.7 The Electric Power Industry 153. HISTORY OF ELECTRIC POWER IN GHANA 16

3.1 Introduction 163.2 Before Akosombo (1914 to 1966) 163.3 The Hydro Years (1966 Mid 1980s) 173.4 Thermal Complementation The Takoradi Thermal Power Plant 203.5 Current Power System 233.6 Need for Additional Generation 23

4. REGULATION AND POLICIES 254.1 Introduction 25

4.2 History of electricity policy and regulation 264.3 Restructuring of electricity sector 284.4 Current regulation of electric power in Ghana 29

5. MAJOR ELECTRIC POWER ISSUES 305.1 Consumer issues 305.2 Electric Power and Economic Development 315.3 Environment and Energy Policy Issues 325.4 Financing and Operations 365.5 Performance of Ghanas Electric Power Industry 38

6. FUTURE TRENDS 426.1 Introduction 42

6.2 Technology changes 426.3 Financing 446.4 Industry Re-organisation 466.5 Electric power and Ghanas neighbours West African Power Pool 50

Appendix 1: Ghanaian Electricity Infrastructure 54Appendix 2: Energy Sources for Generating Electricity 56


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Preface

his Guide to Electric Power in Ghana is published by the Resource Center for EnergyEconomics and Regulation (RCEER) which is based at the Institute of Statistical, Socialand Economic Research (ISSER), University of Ghana. It is published for two key

reasons: first, the guide will provide comprehensive facts on Ghanas electric power sector.In doing so it provides the basics, history, regulations and policies affecting electric powergeneration in Ghana. The document evaluates the future prospects of the industry, discuss-ing at length major issues and challenges facing electric power generation in Ghana,particularly financing. It also assesses the role of consumers and their critical contributiontowards the maintenance of the sector.

Secondly, it was envisaged that the process of putting together this guide will promotegreater collaboration between RCEER and all stakeholders. As a newly established center,

RCEER seeks to collect, store, process and disseminate data and knowledge on the energysector; conduct research to support energy sector development and governance; developteaching material for both academic and professional audience; and educate the public onenergy related issues.

This Guide to Electric Power in Ghana has six chapters. Chapter one discusses consump-tion, expenditure and revenue patterns of electricity and the entire electric power system inGhana. Chapter two emphasises the basics of electricity, while Chapter three generallydetails the phases of power generation in Ghana and states the case for developing addi-tional power generation facilities. Chapters four and five trace the policies and regulatorydevelopments that influence electric power generation in Ghana as well as discuss reformscurrently being undertaken within the industry to address major challenges. The finalchapter summarises the major issues and looks at new technologies for the future develop-ment of electric power generation in Ghana and neighbouring countries.

Following a lot of consultation, considerable information and data have been assembled forthe guide. The guide has been prepared to meet the needs of policy makers, practitioners,academics, media practitioners and the general public. Additionally, the guide serves aseasy reference material for many who ordinarily would find it difficult to gain access to suchinformation.

A number of individuals and organizations have contributed immensely to make thispublication possible. We express our appreciation to USAID which funded the project. Wealso thank Dr. Michelle Foss and Dr. Gurcan Gulen, both of the Center for Energy Econom-ics, University of Texas, Austin, USA for their comments and assistance. We also thank MrsKorantema Adi-Dako for her editing work and Mrs Helen Sunnu for her typesetting work.

Prof. Ernest AryeeteyDirector, ISSER and Chairman, RCEER Steering Committee

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1. Facts on Ghanas Electric Power

1.1 Who uses electricity in Ghana

ith a customer base ofapproximately 1.4 million, ithas been estimated that 45-

47 percent of Ghanaians, including 15-17 percent of the rural population,have access to grid electricity with aper capita electricity consumption of358 kWh. All the regional capitals havebeen connected to the grid. Electricityusage in the rural areas is estimated tobe higher in the coastal (27 percent)

and forest (19 percent) ecologicalzones, than in the savannah (4.3percent) areas of the country. In 2004,Ghanaians consumed 5,158 gigawat-thours (GWh) of electricity. It isestimated that about half of thisamount is consumed by domestic (orresidential) consumers for householduses such as lighting, ironing, refrig-eration, air conditioning, television,radio and the like. Commercial and

industrial users account for the rest.The majority of the customers are inservice territories of the ElectricityCompany of Ghana (ECG) and theNorthern Electrification Department(NED) and they are regulated (Table1.1). However, there are also deregu-lated consumers such as mines, andaluminum companies, which accountfor one third of total consumption.One industrial entity, VALCO, can

account for most of this amount whenit is operating normally.

Residential consumers comprisemiddle and high-income urban con-sumers. This consumer-class typicallyuses a number of high energy consum-ing household appliances and itemssuch as air conditioners, fridges, water

heaters, electric cookers in addition toa substantial amount of lightingequipment and bulbs for the houses.The majority of the rest of the residen-tial consumers use electric power forlighting.

Table 1.1: ECG and NED Customerpopulation and energy consumption,2004

Customer Numberof

Customers

EnergyConsumption

(GWh)

ECG 1,200,000* 4,818

NED 188,344 340

TOTAL 1,388,344 5,158

*Includes active customers, non-activecustomers and bulk customers.

The major characteristic residentialarrangement is the compound housemulti-house phenomenon essentiallya number of households living in acompound and sharing basic amenitiesincluding one electricity meteringsystem.

Apart from residential consumerswho are considered to be smallusers, other consumers whose con-sumption is not considered large byvirtue of their activities are the non-

residential consumers as well as smallindustrial concerns which are knownas special load tariff customers (SLTs).Non-residential consumers compriseoffices, banks and other small busi-nesses. Since the 1980s, thegovernment has pursued a policy ofextending electricity to the rural

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communities. The objective of this is toencourage the use of electricity forproductive use for cottage industriesand eventually the growth of theseindustries into bigger consumerswhich will become a source of em-ployment and economic growth for thecommunities they are situated in.

1.2 Electricity and populationgrowth

In Ghana, electricity consumption hasbeen growing at 10 to 15 percent perannum for the last two decades. It isprojected that the average demandgrowth over the next decade will be

about six percent per year. As a result,consumption of electricity will reach9,300 GWh by 2010. The projectedelectricity growth assumption hasprofound economic, financial, socialand environmental implications for thecountry. The aspirations of developingcountries for higher living standardscan only be satisfied through sustaineddevelopment of their electric powermarkets as part of their basic infra-

structure. Electricity demand willgrow much faster than overall eco-nomic growth (4-5 percent per year) orthan population growth (which is lessthan two percent a year) becausecontinuing urbanization will allownewly urbanized segments of thepopulation to expand their electricityconsumption manifold.

Urbanization in Ghana is expectedto increase from around 40 percent in2000 to about 55 percent in 2012 andeventually to 60 percent by 2020. Alittle more than a third of the urbanpopulation lives in Greater Accra andis expected to reach around 40 percentby 2020. A considerable percentage ofhousehold expenditure goes intoenergy. Energy sources in urban areas

are more diversified than in ruralareas, since access to a variety ofcommercial fuels and appliances arehigher in the urban areas than in therural areas. Often the cost of alterna-tives is higher in the rural areas than itis in the urban where incomes arelower.

Clearly, with the Ghanaian econ-omy growing, increasing urbanpopulations will consume more elec-tricity. The Energy Commission (EC)estimates that residential demand mayreach anywhere between 7,000 and13,000 GWh by 2020 depending on therate of economic growth and urbaniza-

tion. The residential sector is not theonly segment expected to grow;commercial and industrial consump-tion will grow as well to 3,000 to10,000 GWh by 2020 according to theEC. If VALCO is fully operational, anadditional 2,000 GWh should beexpected. In order to meet this increas-ing demand, new power generation aswell as transmission and distributionfacilities will have to be built.

Ghanaian governments have beenpursuing a national electrificationpolicy. Still, more than half of thepopulation remains without access togrid-based electricity. It is very expen-sive to build long-distance trans-mission lines to serve small communi-ties, especially when thesecommunities are relatively poor andcannot afford to pay rates high enough

to cover the cost of these services.Moreover, there is weak or no evi-dence of increased economic activity incommunities that benefited from thenational electrification scheme. Smallerscale and locally installed generationsystems using solar panels, batteriesand the like can be more affordable.


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Nevertheless, rural electrification willcontinue to be a challenge for Ghana.

1.3 Organisations

There are several key entities in the

Ghanaian electric power industry.They will be discussed and referred toin later chapters in more detail. In thissection, we provide a short introduc-tion to each of these entities.

The Ministry of Energy: Ultimatebody responsible for development ofelectricity policy for Ghana.

The Volta River Authority (VRA):State-owned entity that is responsiblefor generation and transmission ofelectricity in Ghana. VRA operates thelargest generation facility in Ghana,the Akosombo hydroelectric plant.

The Electricity Company of Ghana(ECG): State-owned entity that isresponsible for distribution of electric-ity to consumers in southern Ghana,namely Ashanti, Central, GreaterAccra, Eastern and Volta Regions ofGhana. ECG is the entity that consum-

ers interact with when they receiveand pay their bills or when they haveservice questions (billing, metering,line connection etc.).

The Northern ElectrificationDepartment (NED): A subsidiary ofVRA and responsible for power distri-bution in northern Ghana namely,Brong-Ahafo, Northern, Upper Eastand Upper West Regions.

The Public Utilities RegulatoryCommission (PURC): Independentagency that calculates and sets electric-ity tariffs, educates customers aboutelectricity services as well as energyefficiency and conservation and en-sures the effectiveness of investments.

The Energy Commission: Independ-ent agency that licenses private andpublic entities that will operate in theelectricity sector. EC also collects andanalyses energy data and contributesto the development of energy policyfor Ghana.

The Private Generators: Domestic orinternational entities that build powergeneration facilities in Ghana. Theysell their electricity to VRA or ECG.

The Energy Foundation: a Ministry ofEnergy Private Enterprises Founda-tion (PEF) initiative, which was set upin 1997 to promote energy efficiencyand conservation programmes. Initialactivities focused primarily on provi-sion of technical support to industries,introduction of compact fluorescentlamps (CFLs) countrywide and publiceducation.

1.4 Electric power system

The physical equipment of an electricpower system includes generationwhich makes electricity, a transmission

system that moves electricity from thepower plant closer to the consumerand local distribution systems whichmove electric power from the trans-mission system to most consumers.See Appendix 1 for a map of theGhanaian electric power system.

Generation

Electric power plants use coal, lignite,natural gas, fuel oil, and uranium tomake electricity. In addition, renew-able fuels include moving water, solar,wind, geothermal sources and bio-mass.

The type of fuel, its cost, and gener-ating plant efficiency can determinethe way a generator is used. Forexample, a natural gas generator has a


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high marginal cost but can be broughton-line quickly. Coal, lignite, andnuclear units have lower marginalcosts but cannot be brought on-linequickly. They are used primarily toprovide the base load of electricity.

Costs for fuel, construction andoperations and maintenance varygreatly among types of power plant.For example, renewable generationplants such as solar or wind, havevirtually no fuel costs but are expen-sive to manufacture and install.Nuclear and coal fueled plants havelow fuel costs but can be more expen-sive to construct and maintain. Coal

and lignite units also incur additionalcosts for meeting air quality standards.Natural gas plants have higher fuelcosts than coal or nuclear, but havelower initial construction costs.

Ghanaian generators have aninstalled capacity of more than 1,650megawatts. About 1,100 MW is hy-droelectric and 550 MW is thermalcapacity burning light crude oil.

Capacity vs. Actual Generation In2003, total demand was 8,500 gigawat-thours (GWh). Electricity fromhydroelectricity facilities provided6,500 GWh. The rest of our electricityis generated from thermal powerplants burning light crude oil, which isimported. Electricity is usually dis-patched first from hydroelectricitystations because it is cheaper per kWhto generate power at these facilities as

long as water is available.Storing Electricity Unlike water

and natural gas, electricity cannot beeasily stored. This is a fundamentalchallenge of the electric power system.There is no container or large "battery"that can store electricity for indefinite

periods (see following). Energy isstored in the fuel itself before it isconverted to electricity. Once con-verted, it has to go out on the powerlines.

Electricity Storage Technologies -Compressed air, pumped hydroelec-tric, advanced batteries and super-conducting magnetic energy storageare the four main technologies beingstudied for possible electricity storage.Compressed air and pumped hydroare used in some locations around theworld.

Transmission System

Power plants are located at one pointand electricity must be moved fromthat point to the consumer. The trans-mission system accomplishes much ofthis task with an interconnectedsystem of lines, distribution centers,and control systems.

As of December 2003, the existingtransmission network system com-prised 36 substations and approxi-mately 4000 circuit km of 161 kV and69 kV lines. This includes 129 km ofdouble circuit 161kV interconnectionto Togo and Benin. There is also asingle circuit, 220 km of 225 kV inter-tie with La Cte dIvoire's network.

Local Distribution Systems

Most homes and businesses use 120-and 240-volt electric power whileindustries often use much higher

voltages. Large commercial and indus-trial customers may bypass the localdistribution system, receiving electric-ity at high voltage directly from thetransmission system.


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Table 1.2: Ghana electricity system capacity supply and demand balance

Generation Source EffectiveCapacity

(MW)

Percent of TotalAvailable

Effective Capacity

InstalledCapacity

(MW)

percent ofInstalledCapacity

Hydro:

Akosombo 850 1020

Kpong 120 160

Total Hydro 970 56 1180 55

Thermal:

TAPCO 320 330

TICO 220 220

TDS 15 35

OECF Barge 0 125

Total Thermal 555 32 710 33

Imports 200 12 250 12

Total Installed Capacity IncludingImports

2140 100

Total Available Effective Capacity 1725 100 81

System Coincident Peak Demand* 1200 70 56

Reserve Margin 525 30 25

*VRA System Peak Without VALCO @ 3 Pot-Lines

TAPCO - Takoradi Power CompanyTICO - Takoradi International CompanyTDS - Tema Diesel Station

Substations on the transmission

system receive power at higher volt-ages and lower them to 24,900 volts orless to feed the distribution systems.The distribution system consists of thepoles and wires commonly seen inneighborhoods. At key locations,voltage is again lowered by transform-ers to meet customer needs.

Customers on the distributionsystem are categorized as industrial,

commercial and residential. Industrialuse is fairly constant, both over theday and over seasons. Commercial useis less constant and varies over sea-sons. Residential and commercial useare more variable, sometimes changingrapidly over the day in response to

occupant needs, appliance use and

weather events.

As of December 2003, the entiredistribution system comprised 8,000km of sub-transmission lines, 30,000km of distribution networks with 22bulk supply points and 1,800 MVA ofinstalled transformer capacity.

1.5 How much does it cost andhow much do we pay?

Since most of the electricity is gener-ated from hydro facilities that werebuilt several decades ago, the cost ofgeneration has been pretty low (about2-2.5 US cents per kWh). But, as de-mand grew and VRA had difficultysupplying electricity during years oflow rainfall, new thermal plants were


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built in the late 1990s. These plantshave costs ranging from 4.5 to 8 UScents per kWh, and sometimes higher,depending on the cost of importedfuels such as light crude oil. As aresult, the average cost of generationincreased from about 2 US cents perkWh in the mid-1990s to about 6 UScents in 2002. However, tariffs to end-users have not always reflected thesecosts due to governments subsidizedtariff policy.

Electricity supply is divided intobulk electricity (transmission level)and final electricity (distribution level).Average bulk electricity price was

below 4 US cents per kWh in the early1990s until 1998 when it went up tobetween 4.0 to 4.5 US cents per kWh,below the cost of generation.

After its establishment in 1997, thePublic Utilities Regulatory Commis-sion (PURC) started setting electricitytariffs, in consultation with key stake-holders comprising the generators,distributors and representatives ofmajor consumers. PURC developed atransition plan to trigger a gradualadjustment to economic cost recoveryby 2003. The automatic price adjust-ment formula of the Transition Planhas been effected once in 2003 andtwice in 2004 with the latest adjust-ment in 2004 affecting only the BulkSupply Tariff (BST) and the Distribu-tion Service Charge (DSC). Thecountry runs a block end user tariff

system for electricity reaching allclasses of consumers. The sum of theBST and the DSC is the End User Tariff(EUT) charged by the distributioncompanies. The addition of thermalgeneration has pushed up the EndUser Tariff to about 8.2 US cents perkWh: a BST of about 4.8 US cents

(including a postage stamp transmis-sion charge of about 0.9 US cents) anda DSC of about 3.4 US cents.

There are different tariffs for indus-trial, commercial (non-residential) and

residential customers. The tariff forresidential customers has a lifelinetariff for low consumption, which wasset at 100 kWh per month maximum in1989/90 but was downgraded to 50kWh per month maximum by the year2000, which is still high compared tosome neighbouring countries (forexample, 20 kWh for Benin and 40kWh in Togo). The lifeline tariff isabout US $1.5 (about 13,000 cedis) per

month. The Government of Ghanasubsidizes the lifeline consumers to thetune of about US $1 per month but ithas been unable to make regular andtimely remittances to the utilities. Thetotal subsidies owed by the Govern-ment to the distribution utilities byend of 2003 ranged from US $400,0001,400,000.

The average tariff for final electric-ity in general, was below 5 US centsper kWh until 1998 when it shot up tobetween 5.2 - 8.2 US cents per kWh.Above 8 US cents per unit, thoughrelatively low compared to someneighbouring countries, it is notattractive to induce high level com-mercial and industrial usage. At thesame time, industrial customerssubsidize residential consumers. Thesepolicies are hampering the develop-

ment of an industrial base in Ghanathat can compete in regional andglobal markets and fuel economicgrowth.

There are a number of other chal-lenges in fixing the distortions inelectricity tariffs. First, utilities need toimprove their operational efficiencies


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so that they can be financially soundwhile lowering tariffs for consumers ofelectricity. A second and relatedchallenge concerns the average tariffcollection efficiency, which has rangedfrom 75 to 85 percent. PURC has abenchmark of 95 percent. Althoughutilities are called upon to improvetheir customer relations and servicequality; consumers have the duty toprocure legal connections and to paytheir bills regularly. Otherwise, theelectricity system cannot be expandedreliably to meet the growing demand.

1.6 Electric power and Ghanasneighbours

West Africa's total installed electricgenerating capacity was 9.4 gigawatts(GW) at the beginning of 2001, themajority of which was thermal (about59 percent). Ghana is the secondlargest electricity market after Nigeriaboth in terms of generation capacityand consumption in the region, fol-lowed by La Cte dIvoire.

Figure 1.1: Average annual growth in elec-tricity demand, 2003-2012

Total electricity generation for theregion in 2001 was 33.8 terawatthours(TWh), with Nigeria (15.7), Ghana (8.8)and La Cte d'Ivoire (4.6) being the

largest generators. In 2001, total re-gional electricity consumption was31.8 TWh, led by Nigeria's 14.6(45.8%). Ghana (8.8, 27.8%), and LaCte d'Ivoire (3.0, 9.4%) were the nextlargest electricity consumers.

There are roughly 234 million po-tential electricity consumers in theregion. Only about 33 percent of themhave access to electricity. Demand forelectric power in the region is expectedto grow by five percent annually overthe next 20 years, and much faster insome countries (see Figure 1.1). Basedon the existing capacity of 10,000megawatts, the region needs to in-

crease its generating capacity by about17,000 megawatts by 2023 to keep upwith demand. Most of the countries inthe region have small power utilities;the largest three are in Nigeria (2,800MW), Ghana (1,600 MW) and La CtedIvoire (1,200 MW). All others haveless than 450 MW of capacity.

The electric power transmissionsystem of Ghana is connected to itsneighbours, La Cte dIvoire on thewest by a 226-kV transmission line andTogo and Benin on the east by a 161-kV transmission line. Ghana alsosupplies electric power to BurkinaFaso in the north through a low volt-age distribution network. A highvoltage transmission system betweenGhana and Burkina Faso is beingdeveloped. In 2002, La Cte dIvoireexported 1,563 GWh of electricity

(worth about $77 million), of which111 GWh went to Burkina Faso andanother 233 GWh was transmittedacross Ghana to Togo and Benin. Alsoin 2002, Ghana exported an additional170 GWh of electricity to Togo andBenin.


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Under the leadership of the Eco-nomic Community of West AfricanStates (ECOWAS), there is an effort tocreate a regional power pool, startingwith Nigeria, Benin, Togo, Ghana, LaCte dIvoire, Burkina Faso and Nigerwhich are already interconnected. Theproject, known as the West AfricanPower Pool (WAPP), also aims toincrease energy trade in the region andto promote foreign investment in theelectricity sector.

If this regional approach to electric-ity sector development is successful,countries in the region are expected tosave about $3-5 billion over 20 years.The WAPP is now an ECOWAS prior-ity project for the New Partnership forAfrican Development (NEPAD). Amore detailed discussion on WAPP isprovided in Section 6.5.


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2. The Basics of Electric Power

2.1 Introduction

lectricity travels fast, cannot bestored easily or cheaply, andcannot be switched from one

route to another. These three princi-ples are basic to the operation of anelectric power system. Electricity isalmost instantaneous. When a light isturned on, electricity must be readilyavailable. Since it is not stored any-where on the power grid, electricitymust somehow be dispatched imme-diately. A generator is not simplystarted up to provide this power.Electric power must be managed sothat electricity is always available forall the lights, appliances and otheruses that are required at any particularmoment.

Electricity travelling from one pointto another follows the path of leastresistance rather than the shortest

distance. With long distances of inter-

connected wires, electricity may travelmiles out of any direct path to getwhere it is needed. As a result of thesethree principles, designing and operat-ing an electrical system is complex andrequires constant management.

Energy is used in diverse ways andthe most commonly utilized form ofenergy is heat. Energy may be ob-tained either directly or indirectly

from energy sources; electrical energyor electricity, for instance, is alwaysinvariably produced indirectly from amyriad of primary energy sources.Electricity is one of the key types ofenergy; it is made up basically of theflow of tiny particles of matter calledelectrons. Practically everything onthis earth, including humans, containselectrons and therefore can be de-scribed as partly electrical.

2.2 Defining and MeasuringElectricity is simply the flow or ex-change of electrons between atoms.The atoms of some metals, such ascopper and aluminum, have electronsthat move easily. That makes thesemetals good electrical conductors.

Electricity is created when a coil ofmetal wire is turned near a magnet(Diagram 1). Thus, an electric genera-tor is simply a coil of wire spinningaround a magnet. This phenomenonenables us to build generators thatproduce electricity in power plants.

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The push, or pressure, forcingelectricity from a generator is ex-pressed as volts. The flow of electricityis called current. Current is measuredin amperes (amps).

Watts are a measure of the amountof work done by electricity. Watts arecalculated by multiplying amps byvolts. Electrical appliances, light bulbsand motors have certain watt require-ments that depend on the task they areexpected to perform. One kilowatt(1,000 watts) equals 1.34 horsepower.

The watt (W) represents the unit ofmeasure of electric power or rate ofdoing work. Large amounts of electricpower are denoted as follows:

1. Kilowatt (kW): equal to 1,000 W

2. Megawatt (MW): equal to 1,000,000W or 1,000 kW

3. Gigawatt (GW): equal to1,000,000,000 W; 1,000,000 kW or 1,000MW

4. Terawatt (TW): equal to1,000,000,000,000 W; 1,000,000,000 kW;

1,000,000 MW or 1,000 GW.

A 60-W incandescent bulb will, forexample, require 60 watts of electricpower to operate or light up. On theother hand, a 3-kW electric kettle willneed 3,000 watts of electric power toboil water. The kilowatt-hour (kWh) isthe basic unit of measure of theamount or quantity of electricity(electric energy) used. A kilowatt-hour

is equal to one kilowatt of electricpower supplied to or taken from anelectrical power system for one hour. Itrepresents the amount of work doneby one kilowatt in one hour. Otherrepresentations of electric energyutilized are the following:

1. Watt-hour (Wh): equal to one-thousandth of 1 kWh or (1kWh/1,000)

2. Megawatt-hour (MWh): equal to1,000,000 Wh or 1,000 kWh

3. Gigawatt-hour (GWh): equal to

1,000,000,000 Wh; 1,000,000 kWh or1,000 MWh

4. Terawatt-hour (TWh): equal to1,000,000,000,000 Wh; 1,000,000,000kWh; 1,000,000 MWh or 1,000 GWh.

The kilowatt-hour (kWh) is alsoknown as one unit of electricity. If a100-W bulb burns continuously for 10hours, then 1 unit or 1 kilowatt-hour ofelectricity has been used. This is

described in mathematical form as:

100-W x 10 hours = 1000 Wh = 1 kWh= 1 unit of electricity.

Most electric plants generate kilowatts(kW) or megawatts (MW) of electricpower while the energy productioncould be in billions of units or kilo-watt-hours (kWh).

The average electricity customer inGhana uses about 350 kWh annually,with large differences between indus-trial users and residential users as wellas between urban users and ruralusers. The world average for electricityconsumption is about 2,900 kWh perperson. In high income countries,average consumption is more than8,000 kWh per person.

Electricity is generated and usuallytransmitted as alternating current

(AC). The direction of current flow isreversed 60 times per second, called 60hertz (Hz). Because of the interconnec-tion within the power grids, thefrequency is the same throughout thegrid. Operators strive to maintain thisfrequency at 60 Hz.


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Higher voltages in many instancescan be transmitted more easily bydirect current (DC). High voltagedirect current (HVDC) lines are usedto move electricity long distances.

2.3 Generating ElectricityThere are many fuels and technologiesthat can generate electricity. Usually afuel like coal, natural gas, or fuel oil isignited in the furnace section of aboiler. Water piped through the boilerin large tubes is superheated to pro-duce heat and steam. The steam turnsturbine blades which are connected bya shaft to a generator. Nuclear power

plants use nuclear reactions to produceheat while wind turbines use the windto turn the generator. A generator is ahuge electromagnet surrounded bycoils of wire which produces electricitywhen rotated (Diagram 2).

Electricity generation ranges from13,000 to 24,000 volts. Transformersincrease the voltage to hundreds ofthousands of volts for transmission.High voltages provide an economicalway of moving large amounts ofelectricity over the transmissionsystem.

2.4 Transmission andDistribution

Once electricity is given enough push(voltage) to travel long distances, it canbe moved onto the wires or cables ofthe transmission system. The transmis-sion system moves large quantities ofelectricity from the power plantthrough an interconnected network oftransmission lines to many distribu-tion centers called substations. Thesesubstations are generally located long

distances from the power plant. Elec-tricity is stepped up from lowervoltages to higher voltages for trans-mission.

High voltage transmission lines areinterconnected to form an extensiveand multi-path network. Redundantmeans that electricity can travel over


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various different lines to get where itneeds to go. If one line fails, anotherwill take over the load. Most transmis-sion systems use overhead lines thatcarry alternating current (AC). Thereare also overhead direct current (DC)lines, underground lines, and evenunder water lines.

All AC transmission lines carry three-phase current - three separate streamsof electricity travelling along threeseparate conductors. Lines are desig-nated by the voltage that they cancarry. Voltage ratings are usually 345kilovolt (kV) for primary transmissionlines and 138 kV and 69 kV for sub-

transmission lines. Transmissionvoltages in Ghana are presently 69,000volts, 161,000 volts and 220,000 volts. Itis envisaged to operate 330,000 voltstransmission lines along parts of thecoastal corridor of the country by 2008.Sub-transmission voltages are 33,000volts and 34,500 volts. Apart from thereduced level of voltage, a sub-transmission system is similar to atransmission network.

Even though higher voltages helppush along the current, electricitydissipates in the form of heat to theatmosphere along transmission anddistribution lines. This loss of electric-ity is called line loss. The loss will behigher if the lines are not well main-tained by the utilities. Around theworld, best utility practices lower thetechnical line loss during transmission

and distribution to 7-8 percent. InGhana, this ratio was about 14 percentin 2001 (11 percent during distributionand three percent during transmis-sion). It is also estimated that there isabout 14 percent of non-technical

losses that are associated with illegalconnections and unpaid consumption.1

Switching stations and substations areused to (1) change the voltage, (2)transfer from one line to another, and

(3) redirect power when a fault occurson a transmission line or other equip-ment. Circuit breakers are used todisconnect power to prevent damagefrom overloads.

Control centers coordinate the opera-tion of all power system components.One or more utilities can make up acontrol area. To do its job, the controlcenter receives continuous informationon power plant output, transmissionlines, ties with other systems, andsystem conditions. In Ghana, VRA andECG manage their control centers asthe main transmission and distributionproviders.

2.5 Transmission Constraints

There are some important constraintsthat affect the transmission system.These include thermal limits, voltage

limits, and system operation factors.Thermal/Current Limits

Electrical lines resist the flow of elec-tricity and this produces heat. If thecurrent flow is too high for too long,the line can heat up and lose strength.Over time it can expand and sagbetween supporting towers. This canlead to power disruption. Transmis-sion lines are rated according to

thermal limits as are transformers andother equipment.

Voltage Limits

Voltage tends to drop from the send-ing to the receiving end of a

1 Transitional Plan for Electricity Rate Adjust-ment 2001-2002 prepared by the PURC.


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transmission line. Equipment (capaci-tors and inductive reactors) is installedto help control voltage drop. If voltageis too low, customer equipment andmotors can be damaged.

System Operation Constraints

Power systems must be secure andreliable. Operating constraints areneeded to assure that this is achieved.

Power Flows: Electricity flows overthe path of least resistance. Conse-quently, power flows into othersystems' networks when transmissionsystems are interconnected. Thiscreates what are known as loop flows.

Power also flows over parallel linesrather than the lines directly connect-ing two points-called parallel flows.Both of these flows can limit the abilityto make other transmissions or causetoo much electricity to flow alongtransmission lines thus affectingreliability.

Preventive Operations: The primaryway of preventing service failures

from affecting other areas is throughpreventive operations. Some standardsand guidelines developed by theutility or regulator or another entityare usually desired. Operating re-quirements include (1) having asufficient amount of generating capac-ity available to provide reserves forunanticipated demand and (2) limitingpower transfers on the transmissionsystem. The guidelines recommend

that operations be able to handle anysingle contingency and to provide formultiple contingencies when practical.Contingencies are identified in thedesign and analysis of the powersystem.

System Stability: The two types ofstability problems are maintaining

sychronization of the generators andpreventing voltage collapse. Genera-tors operate in unison at a constantfrequency of 60 Hz. When this isdisturbed by a fault in the transmis-sion system, a generator mayaccelerate or slow down. Unlessreturned to normal conditions, thesystem can become unstable and fail.

Voltage instability occurs when thetransmission system is not adequate tohandle reactive power flows. Reactivepower is needed to sustain the electricand magnetic fields in equipment suchas motors and transformers, and forvoltage control on the transmission

network.

2.6 Distribution

The distribution system is made up ofpoles and wire seen in neighborhoodsand underground circuits. Distributionsubstations monitor and adjust circuitswithin the system. The distributionsubstations lower the transmission linevoltages to 34,500 volts or less. InGhana, the median voltage is 11,000

volts. The voltage is then furtherreduced by distribution transformers(substations) to the utilization voltagesof 415 volts three-phase or 230 voltssingle-phase supply required by mostusers.

Substations are fenced yards withswitches, transformers and otherelectrical equipment. Once the voltagehas been lowered at the substation, the

electricity flows to homes and busi-nesses through the distributionsystem. Conductors called feedersreach out from the substation to carryelectricity to customers. At key loca-tions along the distribution system,voltage is lowered by distribution


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transformers to the voltage needed bycustomers or end-users.

Apart from voltage magnitude,distribution systems differ in otherways from transmission networks. The

distribution network has more feedersor wires and more sources of powersupply than the transmission network.

The structure or topology of itsnetwork is also different: this may beeither radial overhead feeder as areoften used in rural areas or loop/ring

format that are the norm in urbanareas. Ring circuits are usually inter-connected to form networks used forenhancing reliability of supply tocustomers. Radial feeders are cheaperthan ring or loop circuits but are lessreliable as there is only one pathbetween the substation and the cus-tomer. A failure of any componentalong the path results in complete lossof power delivery. Ring systems

however provide two paths betweenthe sources of power (substations orservice transformers) and every cus-tomer. Here, each loop is designedsuch that service can be maintainedregardless of a break at any point onthe loop.

The effectiveness of a distributionsystem is measured in terms of servicecontinuity or reliability, service qualityin terms of voltage stability and lowestcost possible. Distribution systems alsoface similar cost constraints for trans-mission networks but to a much lesserextent.

Customers at the End of the Line

The ultimate customers who consumeelectricity are generally divided intothree categories: industrial, commer-cial, and residential. The cost ofserving customers depends upon anumber of factors including the type ofservice (for example, if service is takenat high or low voltage) and the cus-tomer's location with respect togenerating and delivery facilities.

Industrial

Industrial customers generally useelectricity in amounts that are rela-tively constant throughout the day.They often consume many times moreelectricity than residential consumers.

Most industrial demand is consideredto be base load. As such it is the leastexpensive load to serve. Industrialloads are expected to remain withincertain levels over time with relativelylittle variation. Major industrial cus-tomers may receive electricity directlyfrom the transmission system (ratherthan from a local distribution system).

Commercial

Commercial loads are similar toindustrial in that they remain withincertain levels over intermediate peri-ods of time. Examples of commercialcustomers are office buildings, ware-houses, and shopping centers.


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Residential

Residential electrical use is the mostdifficult to provide because house-holds use much of their electricity inthe morning and evening and less at

other times of the day. This is lessefficient to provide and therefore amore expensive use of the utility'sgenerators. Over time as homeownersbuy new appliances and change life-styles, the expected loads also change.Examples of residential loads areindividual residences.

2.7 The Electric Power Industry

Organizations that generate, transmit

or distribute electricity are called(public) utilities due to the fact that theyhave the capacity to satisfy essentialhuman wants which lead to enhance-ment of the quality of life. Utilitiesmay be vertically integrated in whichcase electric power generation, trans-mission and distribution areperformed by one organization. TheVolta River Authority (VRA), a gov-ernment owned utility, is largely

responsible for electricity generationand transmission in Ghana and it canbe described as being partially inte-grated. Limited generation is alsoundertaken by a private company, theTakoradi International Company(TICo), a joint venture ship betweenVRA and CMS Energy Inc. of the USA.

Two nationally owned utilities areresponsible for electric power distribu-

tion in the country. These are theElectricity Company of Ghana (ECG)and the Northern Electricity Depart-ment (NED), the latter being adirectorate of the VRA. The ElectricityCompany of Ghana delivers power tocustomers in the southern half of thecountry comprising Ashanti, Western,

Central, Eastern, Volta and GreaterAccra Regions while the NorthernElectricity Department has responsibil-ity for supplying power to customersin the northern half of the countryconsisting of the Brong Ahafo, North-ern, Upper East and Upper WestRegions.

There are four electric utilities in thecountry, namely VRA, ECG, NED andTICO. The Public Utilities RegulatoryCommission (PURC) and the EnergyCommission (EC) are two governmentagencies that regulate the utilities forthe public good rather than privateinterests. The PURC is an independent

body with primary responsibility forsetting the tariffs that utilities chargetheir customers. The EC on the otherhand is tasked with licensing andregulating the technical operations ofthe utilities. Both regulatory agenciesalso ensure fair competition in thepower market, enforce standards ofperformance for the provision ofservices to customers and protect bothcustomer and utility interests.

Electric energy policy formulation isthe preserve of the Ministry of Energywhile the Energy Foundation, a non-governmental agency, has been veryactive in promoting energy efficiencymeasures.


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3. History of Electric Power in Ghana

3.1 Introduction

here are three main periods of

electricity in Ghana. The first,Before Akosombo, refers to

the period before the construction ofthe Akosombo Hydroelectric PowerPlant in 1966. This is a period ofisolated generation facilities with lowrates of electrification. The secondperiod, the Hydro Years, covers theperiod from 1966 to the mid eighties,the Volta Development era. The VoltaDevelopment includes the Akosombo

Hydroelectric Plant commissioned in1966 and the Kpong HydroelectricPlant, completed in 1982. By the mid-eighties, demand for electricity hadexceeded the firm capability of theAkosombo and the Kpong HydroPower Plants. The third period,Thermal Complementation, fromthe mid eighties to date is character-ised by efforts to expand powergeneration through the implementa-

tion of the Takoradi Thermal PowerPlant as well as the development of theWest African Gas Pipeline to provide asecure and economic fuel source forpower generation. There have beenefforts to link the power facilities ofGhana with neighbouring countriesincluding the implementation of theGhana-Togo-Benin transmission lineas well as the Ghana - La Cte dIvoireinterconnection carried out during thesecond period. As the economies ofGhana and its neighbours continue togrow, there are many challengesremaining in meeting the increasingdemand for electricity in the regionwhile at the same time pursuingpolicies of fuel diversification, gridintegration and sector restructuring.

3.2 Before Akosombo(1914 to 1966)

Before the construction of theAkosombo hydroelectric plant, powergeneration and electricity supply inGhana was carried out with a numberof isolated diesel generators dispersedacross the country as well as stand-alone electricity supply systems. Thesewere owned by industrial establish-ments such as mines and factories,municipalities and other institutions(e.g. hospitals, schools etc.).

The first public electricity supply inthe country was established in Sekondiin 1914. The Gold Coast RailwayAdministration operated the systemwhich was used mainly to support theoperations of the railway system andthe ancillary facilities which went withits operations such as offices, work-shops etc. In 1928, the supply from thesystem was extended to Takoradi

which was less than 10 km away. Thissystem served the needs of railwayoperations in the Sekondi and Ta-koradi cities.

In addition to the Railways Admini-stration, the Public Works Department(PWD) also operated public electricitysupply systems and commencedlimited direct current supply to Accrain 1922. On November 1, 1924, thePWD commenced Alternating Current

supply to Accra. The first major elec-tricity supply in Koforiduacommenced on April 1, 1926 andconsisted of three horizontal singlecylinder oil-powered engines. Othermunicipalities in the country whichwere provided with electricity in-cluded Kumasi where work on public

T


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lighting was commenced. On May 27,1927, a restricted evening supplyarrangement was effected and subse-quently, the power station becamefully operational on October 1, 1927.

The next municipality to be sup-plied with electricity in 1927 wasWinneba where with an initial directcurrent supply, the service waschanged to alternating current (AC) byextending the supply from Swedru.During the 1929-30 time frame, elec-tricity supply of a limited nature wascommenced in the Tamale township.Subsequently in 1938, a power stationoperating on alternating current was

commissioned. In 1932, a powerstation was established in Cape Coastand subsequently another station wasopened at Swedru in 1948. Within thesame year, there was a significantexpansion of the electricity system andBolgatanga, Dunkwa and Oda hadelectricity power stations established.The first major transmission extensionof the electricity network in Ghana isbelieved to be the 11 kV overhead

extension from Tema to Nsawamwhich was put into service on May 27,1949. Subsequently a power stationwas commissioned at Keta in 1955.

On April 1, 1947, an ElectricityDepartment within the Ministry ofWorks and Housing was created totake over the operation of publicelectricity supplies from the PWD andthe Railways Administration. One of

the major power generation projectsundertaken by the Electricity Depart-ment was the construction of the TemaDiesel Power Plant. The plant wasbuilt in 1956 with an initial capacity of1.95 MW (3x 650 kW units). This wasexpanded in 1961-64 to 35 MW withthe addition of ten 3 MW diesel gen-

erators and other units of smaller sizes.Subsequently, three of the originalunits were relocated to Tamale and theothers used as a source of spare partsfor the ten newer units. The plantwhen completed was the single largestdiesel power station in Black Africaand served the Tema Municipality. Inaddition, through a double circuit 161-kV transmission line from Tema toAccra, the Tema Diesel Plant suppliedhalf of Accras power demand.

The total electricity demand beforethe construction of Akosombo cannotbe accurately determined due to thedispersed nature of the supply re-

sources and the constrained nature ofelectricity supply. Most of the townsserved had supply for only part of theday. In addition to being inadequate,the supply was also very unreliable.There was therefore very little growthin electricity consumption during theperiod. Total recorded power demandof about 70 MW with the first switchon of the Akosombo station can beused as a proxy for the level of electric-

ity demand in the country just prior tothe construction of Akosombo.

3.3 The Hydro Years (1966 Mid 1980s)

Akosombo Hydroelectric Project

The history of the Akosombo Hydroe-lectric Project is linked with efforts todevelop the huge bauxite reserves ofGhana as part of an integrated bauxite

to aluminium industry. The projectwas first promoted by Sir AlbertKitson, who was appointed in 1913 bythe British Colonial Office to establishwhat is known as the GeologicalSurvey Department. In 1915, while SirKitson was on a rapid voyage downthe Volta River he identified the hydro


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potential of the Volta River and lateroutlined a scheme for harnessing thewater-power and mineral resources ofthe then Gold Coast in an officialbulletin.

The idea was later taken up byDuncan Rose, who came across Kin-stons proposals in the bulletin andbecame interested in the idea of ahydroelectric aluminium scheme.Efforts to develop the scheme furtherintensified in the 1950s with theimplementation of engineering studiesby Sir William Halcrow and Partnerson the possibility of producing powerfrom the Volta River by constructing a

dam at Ajena in the Eastern Region ofGhana. The Halcrow report, whichwas published in 1955 covered theclimate and hydrology of the VoltaBasin, evaporative studies, floodcontrol, geology, power plant designand project cost estimates in detail.

An independent assessment of theHalcrow report by Kaiser Engineers in1959 recommended the construction ofthe dam at Akosombo instead of Ajenaas proposed in the Halcrow report.This meant a complete redesign of thedam and the power plant. The majoradvantage in relocating the dam wasthat the width of the gorge at theproposed crest elevation of 290 feetwas only 2,100 feet compared with3,740 feet at the Ajena site. However,at the Akosombo site, the maximumdepth to bedrock was minus 80 feet as

compared to minus 40 feet at the Ajenasite.

The Volta River Authority (VRA)was established in 1961 with theenactment of the Volta RiverDevelopment Act, 1961 (Act 46) andcharged with the duties of generatingelectricity by means of the waterpower

of the Volta river and by other means,and of supplying electricity through atransmission system. The VRA wasalso charged with the responsibility forthe construction of the Akosombo damand a power station near Akosomboand the resettlement of people livingin the lands to be inundated as well asthe administration of lands to beinundated and lands adjacent thereto.

Construction of the Akosombo damformally commenced in 1962 and thefirst phase of the Volta RiverDevelopment project with theinstallation of four generating unitswith total capacity of 588 MW each was

completed in 1965 and formallycommissioned on January 22, 1966. In1972, two additional generating unitswere installed at Akosombo bringingthe total installed capacity to 912 MW.

By 1969, the Volta Lake, createdfollowing the completion of theAkosombo dam, had covered an areaof about 8,500 km2 and had become theworlds largest man made lake insurface area. It can hold over 150,000million m3 of water at its Full SupplyLevel (FSL) of 278 feet NLD and has ashoreline length of about 7,250 km.The Lake is about 400 km long andcovers an approximate area of 3,275square miles, i.e., 3 percent of Ghana.The drainage area of the Lakecomprises a land area of approximately398,000 km2, of which about 40 percentis within Ghana's borders. The other

portions of the Volta Basin are in Togo,Benin, Mali and la Cte dIvoire. Theaverage annual inflow to Lake Voltafrom this catchment area is about 30.5MAF (37,600 million m3).

Kpong Hydroelectric Project

In 1971, VRA commissioned KaiserEngineers of USA to prepare a plan-


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ning study, "the Ghana Power Study:Engineering and Economic Evaluation of

Alternative Means of Meeting VRAElectricity Demands to 1985", whichrecommended the construction of theKpong Hydroelectric Project, with thedam located upstream of the KpongRapids and the Power Station at Penu,about 18 kilometers upstream ofKpong.

Other options studied included theBui Hydroelectric Plant on the BlackVolta, expansion of the AkosomboPlant with the installation of addi-tional units and development of thePra, Tano and lower White Volta

rivers. Thermal options, includingsteam turbine plants and gas turbineplants were also considered, in addi-tion to the possibility of supply fromNigeria through the Ghana-Togo-Benin (then Dahomey) transmissionline. These options, however, werefound to be less economic than theKpong hydroelectric development.The study also recommended thatthermal plants, which could be de-

ployed faster than the Kpong plant,should be considered for implementa-tion in the event of a significantincrease in demand.

In 1974, VRA commissioned AcresInternational of Canada to carry out areview of the Kaiser Study. Followingthe review, the plant site was changedto Akuse. A major benefit of thechange was the drowning of the

Kpong rapids as a result of the damconstruction. This eliminated theterrible insect, simulium damnosum,the agent of river blindness.

The Kpong Hydroelectric Plant wassuccessfully commissioned in 1982 andgave an additional 160 MW of in-stalled capacity to the existing

hydroelectric capacity.

Demand for Electricity during theVolta Development Period

By 1967, a year after the AkosomboHydroelectric Plant was commis-

sioned, most of the major electricityconsumers were switched off diesel-powered electricity supply and servedfrom Akosombo. The major customersof power were an aluminum smelterand a national electricity distributioncompany established in 1967.

The smelter was owned by theVolta Aluminum Company (VALCO),a company incorporated in Ghana. In

1962, VALCO signed a Master Agree-ment with the Government of Ghana,which included a Power SupplyAgreement for the supply of powerfrom Akosombo to the 200,000-tonnealuminum smelter. VALCO thusserved as the anchor customer forVRA and the first phase of the VoltaDevelopment. Construction of theVALCO smelter commenced in 1964and was completed in 1967 and con-

nected to the VRA transmissionsystem.

In 1967, the Electricity Corporationof Ghana (ECG), established by theElectricity Corporation of Ghanadecree of 1967 (NLCD 125) and Execu-tive Instrument No. 59 dated June 29,1967 vested all assets and liabilities ofthe former Electricity Department inECG.

Total domestic load (excludingVALCO) supplied from the grid in1967 was approximately 540 GWhwith an associated peak demand ofabout 100 MW. Domestic consumptionin 1967 was therefore less than 20percent of the installed capacity at theAkosombo Station.


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Between 1967 and 1976, domesticconsumption more than doubled,growing from about 540 GWh to about1,300 GWh. The average annualgrowth rate was about 10 percent. Thiswas followed by a period of relativelystagnant domestic consumption, 1977to 1980, when domestic consumptionremained around 1,350 GWh. From1981, domestic consumption declinedto a level of about 1,000 GWh in 1984.During this period, supply to VALCOwas governed by the VRA VALCOPower Supply Agreement. Figure 3.1shows consumption of electricalenergy from 1967 to 1985.

In 1972, VRA commenced supply ofelectricity to neighbouring Togo andBenin following the construction of a205-kilometre 161-kV transmission linefrom Akosombo (Ghana) to Lome(Togo). The supply of electricity wasgoverned by a Power Supply Agree-ment executed in 1969 between VRAand the Commutate Electricit deBenin (CEB), a power utility formed bythe two countries, Togo and Benin. In

1983, the interconnected Ghana-Togo-Benin power system was expandedthrough the construction of a 220-kilometre transmission line from thePrestea Substation in Ghana to theAbobo Substation in La Cte dIvoire.

The decline in power consumptionin the early eighties was compoundedby the most severe drought in therecorded history of the Volta Basin,

which occurred from 1982 to 1984.Total inflow into the reservoir overthis three-year period was less than 15percent of the long-term expectedtotal. Electricity supply during thisperiod was consequently rationed.Supply to VALCO was completely

curtailed and export supplies to Togoand Benin were reduced.

3.4 Thermal Complementation The Takoradi Thermal

Power PlantIn 1983, following the drought, VRA aspart of its Generation andTransmission planning process under-took a comprehensive expansionstudy, the Ghana Generation PlanningStudy (GGPS).. The engineeringplanning study which was completedin 1985 confirmed the need for athermal plant to provide a reliablecomplementation to the hydro

generating resources at the Kpong andAkosombo power plants. A majorconsideration for complementing thehydro sources was the natural andinherent characteristic of the VoltaRiver to have highly variable flowsfrom year to year. The Volta River hadshown over 10:1 variation in flowbetween its highest inflow in 1963 andthe lowest in 1983. Indeed thischaracteristic was not for the Volta

River only. Nearly all the tropicalrivers of the world have this cyclicalvariation in inflow over a certainperiodicity.

The study concluded that by addingthermal complementation to the all-hydro system, the vulnerability of thepower system in Ghana would besignificantly reduced. This was becausein times of insufficient rainfall resulting

in low inflows into the Volta Lake, thethermal plants could be used to meetthe shortfall in demand resulting fromreduced hydro generation. In effect, thethermal generators were to serve as aninsurance policy against poorhydrological years to meet the demandfor electricity in Ghana.


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In addition to thermalcomplementation, the study alsorecommended the rehabilitation of the30-MW Tema Diesel Station as animmediate and short term measure to

support the operation of the hydroplants and consequently reduce the riskof another exposure to poor rainfall andreduced power generation. The TemaDiesel plant faced delays in itsrehabilitation but work was completedin 1993. Given its state and importantly,the cost of generation, the Tema Dieselplant has been used intermittently andis currently not in commercialoperation.

Between 1985 and 1992, a number ofstudies were carried out to confirm thetechnical, economic and financialfeasibility of introducing thermalplants within the generation mix.Although, the technical feasibility was

easily established, it was extremelydifficult to establish the economic andespecially financial feasibility of theundertaking given the relatively lowtariffs then being paid by VALCO and

consumers in Ghana.

In addition, the late 1980s saw thebeginning of significant increases inthe demand for power in Ghana. Thiscould largely be attributed to theimpact of the Economic RecoveryProgramme embarked on by theGovernment in 1984/85. A study wasalso carried to determine the optimaltechnology for the thermal plants to be

developed especially in the light of theprofile of the rapidly growing powerdemand in Ghana. The study, namedthe Combustion Turbine FeasibilityStudy, was completed in 1990. TheStudy recommended the addition ofcombustion turbine power plants inGhana.

Figure 3.1: Consumption of electricalenergy from 1967 to 1985

Historic Electricity Consumption

0

500

1,000

1,500

2,000

2,500

3,000

3,500

1966 1970 1974 1978 1982

Years

Energy(GWh)

Domestic

VALCO

Export


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With the continued increase indemand for power, another study,Takoradi Thermal Plant FeasibilityStudy was finally completed in 1992with a recommendation for the con-struction of a 600-MW plant, with aninitial 300-MW combined cycle plantand a 100-MW Combustion Turbineunit to be commissioned by 1995.There were however, delays in financ-ing approvals by the InternationalDevelopment Association, whicheventually resulted in the first 330-MW tranche of the Takoradi Plantbeing commissioned in 1999. It isnoted however that the first 110-MW

combustion turbine unit went intocommercial operation in December1997 and the second in January 1998.

In 1998, the power system in Ghanaexperienced another crisis resulting inthe rationing of power to consumers.The crisis was brought on largely bypoor rainfall and consequently lowinflows into the Volta Lake affectingpower generation, and also the inabil-ity to obtain sufficient back up power

from La Cte dIvoire.

In order to deal with the powershortage, the Government contractedtwo emergency power producers,namely, AGGREKO LTD andCUMMINS Ltd both of the UK toproduce and sell into the distributiongrid in Tema up to 30 MW each. Thisarrangement was ended in 2000 whenthe crisis was over and normal power

generation had been restored. Thepower crises set the basis for theaddition of power plants to the genera-tion system in Ghana through theprivate sector for the expansion of theTakoradi Thermal Power Plant. In1994, the Government launched a newpolicy framework for the developmentof the power sector. The policy envis-

aged the introduction of private sectorparticipation in infrastructural devel-opment for the sector to meet growingdemand.

In 1999, in line with Governments

policy, the VRA entered into a jointventure arrangement with CMS En-ergy of USA to expand the TakoradiThermal Power Plant Station to 550MW with the addition of 2x110 MWCombustion Turbine plants. With theexpansion of the Takoradi ThermalPower Plant, thermal generationincreasingly started playing a majorrole within the power generation mixof Ghana. The two combustion turbine

units were put into commercial opera-tion in March and September 2000respectively. Figure 3.2 shows thesignificant impact of low rainfall onthe Ghanaian power system. Clearly,the addition of thermal generationcapacity in recent years has beenhelpful but remains limited.

Figure 3.2: Electricity generation in

Ghana, 1966-2003

HistoricElectricityGeneration

0

1,000

2,0003,000

4,000

5,000

6,000

7,000

8,000

9,000

1966 1970 1974 1978 1982 1986 1990 1994 1998 2002

Years

Ener

GWh

Imports

Thermal

Total Hydro


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3.5 Current Power SystemFacilities

The total installed generation capacity is1,778 MW. This comprises:

The Akosombo HydroelectricPower Plant with an installedcapacity of 1,038 MW. TheAkosombo plant has beenretrofitted with the replacementof the old turbine runners withnew ones as well as electro-mechanical works aimed atrestoring the plant to its originalcondition. The retrofit wascompleted in March.

160-MW Kpong HydroelectricPower Plant

550-MW installed thermal ca-pacity at the Takoradi ThermalPower Station and;

30-MW Diesel Power Plant atTema.

A 125-MW Power Barge the OsagyefoPower Barge is also available and iscurrently berthed at Effasu Mangyea in

the Western Region with arrangementsongoing to establish viable fuel sourcesfor it. The Osagyefo barge wasdeveloped by the Ghana NationalPetroleum Corporation in order toutilize the natural gas available in theTano oil and gas fields for powergeneration. The barge has beencompleted and is yet to go intocommercial operation.

3.6 Need for AdditionalGeneration

Domestic electric energy consumptionin 2004 was 6,004 GWh. An additional660 GWh was supplied to CEB. It isprojected that the average local(Ghana) load growth over the nextdecade will be about six percent as a

result of which local consumption ofelectricity will reach 9,300 GWh by2010. There is also the potential forsignificant electricity exports andsupply to VALCO when the smelterresumes operations.

The firm capability of our hydrosystem of about 4,800 GWh representsabout half of the projected domesticconsumption for 2010. This impliesthat at least 50 percent of Ghanaselectricity requirement will be pro-vided from thermal sources by theyear 2010.

On the basis of the studies carriedout, the next generation addition is thecompletion of the expansion of theTakoradi power station. This involvesthe addition of 110-MW steam unit inorder to complete the combined cyclearrangements for the TICO powerplant.

In the medium to long term, up to600 MW of additional generatingcapacity will be required by 2012. It isplanned that this additional capacity

will be met through the establishmentof thermal as well as hydro plants suchas the Bui Hydroelectric Plant. Anattractive candidate for generationexpansion is the 300-MW combinedcycle thermal power plant to be lo-cated at Tema. The operation of thisplant is intended to be synchronizedwith the delivery of natural gasthrough the West African Gas pipelineproject.

Currently, the Takoradi ThermalPower Station is fuelled with lightcrude oil, the price for which hasappreciated significantly on the worldmarket. In order to secure a sustain-able and cost-competitive fuel source,Ghana is involved in the West African


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Gas Pipeline (WAGP) Project forpower generation.

The West African Gas Pipeline(WAGP) Project involves the construc-tion of a natural gas pipeline of about

600-kilometres to supply natural gasfrom Nigeria to meet the energyrequirements of Ghana and other WestAfrican countries. The countriespresently involved in the project withGhana are Nigeria, Benin and Togo.The WAGP project will provide asource of clean fuel for VRAs thermalgenerating facilities and other futurethermal plants, and is expected todeliver natural gas at relatively lower

costs than light crude oil currentlydoes.

It is expected that the first gas will bedelivered to the Takoradi powerstation by the beginning of 2007.

In addition, Ghana is involved inthe development of the West AfricanPower Pool (WAPP), aimed at estab-lishing a regional market for electricitytrades. The WAPP is expected to allowthe sharing of available energy re-sources and increase the reliability ofelectricity supply in the West Africanregion

.


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4. Regulation and Policies

4.1 Introduction

rior to 1997, the Government

and the state-owned electricityutility organizations combined

operational responsibilities with policyand regulatory issues. Almost a cen-tury after the commencement of apublic electricity service in what wasto become the modern Ghana, thecountrys electricity sector began arestructuring process in the mid1990s, among other things, to over-come the limitations of the traditional

set up. As far as utility regulation isconcerned, perhaps the most dramaticchange was the policy shift towardsautonomous regulation of the sectorby bodies that operate at arms lengthfrom government.

The current regulatory policyevolved as result of the restructuringof the electricity sector, itself a compo-nent of a broader national

infrastructure and public institutionalreform program. The structure of theelectricity industry in Ghana is similarto the situation in most developingcountries where service providers arestate-owned monopoly organizations.Although the reform in the electricitysector is attributable to several factorsit was prompted largely by multilat-eral donor agencies, fatigued from adecade and a half of concessionary

financial support and consideringreallocation of funds to other sectors.Some of the objectives of the reforms,which envisaged introduction ofcompetition in supply as well asencouragement of private sectorinvestment, necessitated transparencyin regulation of the sector leading to

the development of a sustainableelectricity industry.

It is contended that the reformprocess and the resulting policy de-terminations, including the regulatorymechanisms, were a natural responseto both the external demands andinternal factors. Following the relativesuccesses of restructuring elsewhereand the evolution of regulatory institu-tions, notably in Chile and Britain inthe early 1980s and learning from thelong established traditional American

regulatory experience, the tone was setfor Ghana and indeed most of theAfrican continent to embrace reformsgenerally and also the concept ofindependent regulation.

Quite significantly, by the end of1997, the sectoral structures had beenwell defined and established and theelectricity industry positioned toadvance. Two key regulatory institu-tions were duly created by acts ofParliament. These were the PublicUtilities Regulatory Commission(PURC) established under the PubicUtilities Regulatory Commission Act,1997 (Act 538) and the Energy Com-mission (EC) established under theEnergy Commission Act, 1997 (Act541). As their names imply, the func-tions of these institutions are broader,but this synopsis is limited to theirregulatory mandates regarding theelectricity industry. The followingstructure was adopted under therevamped system: the Ministry ofEnergy is responsible for the broadpolicy direction of the electricityindustry; the Energy Commission isresponsible for indicative nationalplanning, licensing of electricity

P


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utilities and technical standards; andthe Public Utilities Regulatory Com-mission has responsibility foreconomic regulation, ensuring faircompetition among utilities andmonitoring quality of service.

4.2 History of electricity policyand regulation

There is a close linkage between theevolution of electricity policy andregulation and the development andgrowth of the industry from colonialtimes to the post independence era. Inaddition, the various institutionalarrangements and the legal develop-

ments in the sector are useful inconsidering historical perspectives. Assuch the antecedents of the currentelectricity structure are summarizedbelow.

Ghanas electricity supply datesback to 1914 when the Gold CoastRailways Administration started thefirst thermal power generation andpublic electricity supply in the mu-nicipalities of Sekondi and Takoradi.The development and growth of theindustry was slow. From 1924, thePublic Works Department which wasto dominate the industry for a longtime started operating diesel plantswhich had been installed in certainmunicipalities, notably in Accra,Kumasi, Koforidua, Winneba, Swedruand Cape Coast.

In 1947, the Electricity Department

which later became the ElectricityDivision within the Ministry of PublicWorks was created as a separate entityto assume responsibility for the gen-eration and supply of electricity fromboth the Railways Administration andthe Public Works Department. Afterthe take-over, and in the face of grow-

ing urbanization, a long term programwas initiated to accelerate the supplyof electricity to the other big townsand commercial centers.

To streamline the development and

operations of the power stations andensure speedy growth of the electricityindustry, a prerequisite of an ambi-tious industrialization and nationaldevelopment drive, certain measureswhere initiated by the government.These included the enactment of theVolta River Development Act, 1961(Act 46) which established the VoltaRiver Authority (VRA) mandated tobuild and operate hydro power sta-

tions within the Volta Basin and toconstruct and operate the nationalelectricity transmission system as wellas the Electricity Act, 1961 (Act 48),which vested licensing and otherregulatory powers in respect of elec-tricity in the Minister responsible forPublic Works.

The enactment of the ElectricityCorporation Decree, 1967 (NLCD 125)and the repeal of the Electricity Act,established the Electricity Corporationof Ghana (ECG). For the next twodecades, ECG was to remain the entitysolely responsible for electricity supplyand the distribution networks nation-wide. In 1987, the corporations sphereof operation was limited to the south-ern parts of Ghana which also had thegreater concentration of customers.Service provision in respect of the

sparsely populated northern parts ofthe country devolved on the NorthernElectricity Department (NED) whichwas formed as the distribution arm ofthe VRA. This position had been inplace until the radical changes intro-duced with the creation of the EC and


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PURC with regulatory responsibilityover the sector.

Before independence in 1957, theElectricity Supply (Control) Ordinance(Cap 66) provided the legal basis for

regulating the electricity supply anddistribution activities in Ghana. Theregulatory authority was exercised bythe Chief Electrical Engineer of thePublic Works Department. The licens-ing, regulatory and operationalframework for the industry was,however, redefined with the enact-ment in 1961 of two pieces ofimportant sector legislation; the Elec-tricity Act and the Volta River

Development Act. Under the Electric-ity Act, the Minister responsible forPublic Works was vested with licens-ing and other regulatory power for theelectricity sector. In practice the regu-latory function was performed by theChief Electrical Engineer of the Minis-try. The repeal of the Electricity Actand its replacement with the ElectricityCorporation of Ghana Decree estab-lished the industry structure as it was

known until the commencement of theelectricity reform in the mid-1990s.

Both Acts effectively made the twostate-owned electricity organizations,ECG and VRA, self regulatory mo-nopolies with oversight by theMinister responsible for energy. ECGwhich was required to operate on acommercial basis was mandated topurchase electricity from VRA in bulk

for distribution. Governmental controlof the electricity industry is evident inthe functions of the ECG and thecomposition of the governing board ofECG. Among the eight-member board,three were civil servants and the chiefexecutive of a state-owned enterprise(SOE). Thus, the Principal Secretaries

or holders of the most senior civilservice positions in the Ministry withresponsibility for Energy, the Ministrywith responsibility for Finance as wellas the Chief Executive of VRA consti-tuted an overbearing governmentpresence on the utilitys board.

VRA on its part was also required tooperate on a commercial basis and at aprofit and was mandated to build andgenerate hydro electricity and supplyit in bulk to various entities as well asto control and regulate the Volta Basinas the construction and operation ofthe national transmission system gotunderway. Indicative planning for the

national electricity system was alsoundertaken by VRA.

Both utilities had the power to issueregulations in the form of subsidiarylegislation. But the inherent arbitrari-ness in the system was compoundedby the fact that these governmentmonopolies had the ultimate power tofix their own tariffs. The shortcomingsof that arrangement were self evidentin the ensuing market failure thatoccurred. The absence of an independ-ent regulator meant that decisionsrelating to regulation of services weremade by the ministries, which werenot insulated from political considera-tions.

Meanwhile, both VRA and ECGhave been converted from their statu-tory corporation status to companiesregistered under the Companies Code,

1963 (Act 179) under the provisions ofthe related Statutory Corporations(Conversion to Companies) Act, 1993(Act 461). This Act signified Govern-ments strategy to encourage privateparticipation and investments invarious sectors of the economy, includ-ing the electricity sector.


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The importance and necessity for anindependent regulator in the energysector was underscored by the PowerSector Reform Committee which wasestablished in 1994 to look into ways ofbringing about efficiency and toencourage private participation in thepower sector. However the processtowards the establishment of regula-tory institutions, in particular thePURC, was accelerated by the imposi-tion of tariffs by the utility companieswhich precipitated disaffection in theconsuming public, resulting in thesuspension of tariffs. The upshot wasthe establishment of PURC as the

economic regulator and EC as thetechnical regulator and licensingauthority.

4.3 Restructuring of electricitysector

Ghanas electricity sector has beensignificantly reformed in recent years.Several factors have driven the re-forms. In June, 1994, the Governmentissued a Statement of Power SectorPolicy which outlined electricityreform in Ghana. This statement ofpolicy was driven by the indicationgiven by the World Bank in a policypaper that it would no longer be in aposition to provide funding for elec-tricity sector projects in developingcountries. Following the Governmentpolicy statement, the Minister ofEnergy initiated the power sectorreform process to establish the re-quired conditions in Ghana to improveoperational efficiency of the utilitycompanies and streamline tariff settingthat would be transparent and inde-pendent of Government. These wereprerequisites to securing private sectorparticipation in the development of

future electricity infrastructure. TheWorld Bank provided suggestions fordealing with existing statutory restric-tions to the entry into the sector byprivate investors owing to the domi-nant and powerful role of the VRAand ECG; these were insufficientregulation in terms of the lack ofdefinition of the rules of practice andregulations intended to govern opera-tions of the sector; unclear tariff settingcriteria and unpredictable tariff settingregime; lack of transparency in marketaccess and a nebulous governmentpolicy on measures for assistinginvestors in mitigating the risks posed

by the unfavorable investment climate.The objectives of the reform in-

cluded structural changes within thesector to bring about competition insupply, transparency in the regulationof the sector operators, effective com-mercialization of operations ofelectricity utilities and encouragementof private investment in the develop-ment of the electricity sector. Theindustry structure envisaged under the

reform was the unbundling of thesector with multiple generators ofpublic private partnerships, a singletransmission utility to be publiclyowned, creation of distribution zonesand the establishment of a transparentregulatory regime.

In 1997 two regulatory bodies wereestablished to superintend electricityservice provision, among their many

functions. The PURC, establishedunder Act 538, sets rates and monitorsquality. The EC was established underAct 541 as the licensing authority ofelectricity utilities with further statu-tory responsibilities for technicalstandards and indicative planning.


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Both bodies have power to issueregulations for the sector.

In accordance with the provisions ofthe Statutory Corporations (Conver-sion to Companies) Act, 1993 VRA and

ECG have been converted into compa-nies under the Companies Code.Additionally, the physical unbundlingof VRA has occurred and there hasbeen separation of hydro generation,thermal generation and transmissionfunctions into separate organizations.

4.4 Current regulation of elec-tric power in Ghana

The current regulatory framework for

the electricity industry is provided byActs 538 and 541 which established thePURC and EC respectively.

ECs regulatory mandates are:

to receive and assess applica-tions and grant licenses topublic utilities for the transmis-sion, wholesale supply anddistribution of electricity;

to establish and enforce, in con-sultation with PURC, standardsof performance for the relevantpublic utilities;

to promote and ensure uniformrules of practice for the trans-mission, wholesale supply anddistribution of electricity.

PURCs regulatory mandates are:

to provide guidelines on rates

chargeable for electricity ser-vices;

to examine and approve therates;

to protect the interests of con-sumers and providers of utilityservices;

to monitor the standard of per-formance of the utilities;

to promote fair competition.

In furtherance of its regulatory respon-sibilities, PURC has issued guidelines

for setting tariffs in respect of genera-tion, transmission and distribution ofelectricity. These guidelines provide atransparent and predictable mecha-nism for setting rates. In addition, anAutomatic Adjustment Formula hasbeen introduced to allow for quarterlyrevision of tariffs to reflect fluctuationsin crude oil prices and foreign ex-change rates, the hydro-thermalgeneration mix and changes in theconsumer price index. With the auto-matic adjustment formula in place,major tariff reviews would take placeevery four years. The tariff reviewprocess is quite transparent and thepublic and consumers are involvedthrough the public hearings system.Licensing decisions rendered by theEC are subject to appeals to the Minis-ter of Energy or the courts but tariffdecisions are not subject to appeal.


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5. Major Electric Power Issues

5.1 Consumer issues

he use of electric power has

become widespread in Africa;and Ghana is no exception. Over

the last two decades, demand forelectricity for various purposes includ-ing domestic and industrial uses hasbeen increasing at a rate of 10-15percent per annum. This has signifi-cant implications for the rate ofeconomic development. While the useof electricity for domestic purposes(e.g., lighting, radio, television, iron-

ing) will normally lead toimprovement only in the lives ofconsuming individuals, productive useof electricity by industries (all thingsbeing equal) will lead to generalmacroeconomic improvement and arise in the standard of living of thepopulace. The major consideration forGhana is the ability of the country tomatch the rate of electricity demandwith adequate supply as well as the

proportion of energy produced whichis consumed for productive use. It isestimated that about 50 percent ofelectricity produced in Ghana isconsumed by domestic users. If thisproportionate use can be changed infavour of industrial use and/or pro-ductive use then Ghana stands to gain.

In Ghana electricity customergroups comprise Residential, Non-

Residential and Industrial customers.Each group has its requirements andneeds. For most ordinary consumerselectricity has become an importantfactor in their lives, particularly forlighting purposes. The main issues forordinary consumers are (i) the price atwhich the electricity is bought, i.e., the

bill they have to pay and the reliabilityof the service (ii) the level of tariffprice in comparison to reliability,

adequacy and safety of service beingprovided.

Residential Customers

As a large proportion of residentialcustomers are low-income earners, thecost of electricity is critical for them.Therefore a pricing arrangement thatwill ensure that they can enjoy the useof electricity for their basic needs at an

affordable price is important. Thecurrent lifeline tariff targets therural and urban poor whose consump-tion is less than 50 kWh per month.The life-line tariff is typically 60-70percent of the economic cost of sup-ply.

Non-Residential Customers

This comprises major offices, banksand small businesses. For this group,

the cost of energy is also importantparticularly for small businesseswhose electricity cost is a significantcomponent of their operating cost andwho require lower energy costs to bemore competitive in the market placeto survive.

Industrial Customer Special Load TariffCustomers (SLT)

The major industries whose operations

depend to a large degree on a reliablesupply of power are also concernedabout cost and reliability in order toensure their competitiveness in themarkets within which they operate.

T


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5.2 Electric Power andEconomic Development

Electricity, like other forms of energy,is a vital ingredient in the economicdevelopment of countries the world

over. Not only is it a critical factor andcornerstone of the accelerated devel-opment and growth of any nation, it isalso a measure of the standard andquality of life of a people. Without asafe, sustained, relia

guide to electric power in ghana

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