Investment Opportunities in the Energy Sector

The Akosombo Dam

Although beset with rather vexing, short-term problems, Ghana's energy sector is certainly one area that holds enormous potential for long-term growth. It is, thus, one major sector of the economy that proffers inviting opportunities for large scale investment by Ghanaian and foreign investors alike.  For, Ghana's energy needs keep expanding as the population grows and the nation pursues its objective of achieving middle-income status by 2015.

For some time now the Ministry of Energy has been making moves that amount to levelling the field for all investors in this sector. It’s most recent action - creating a new bulk power distribution entity - Ghana Grid Company - that leaves the giant Volta River Authority (VRA) with power generation functions only - must surely have come as a welcome innovation.  For, hitherto VRA's dual functions of producer and distributor, which had virtually placed it in the position of not only leading competitor but also leading player in the determination of bulk power pricing, has had the effect of putting off many potential energy sector investors.

The power crisis, and the resultant power rationing that has been in effect since August, 2006, has generated renewed calls for greater use of alternative energy and much less reliance on traditional sources of power generation, such as hydro and thermal.

Interestingly, just as these arguments raged on, two projects that had been hanging fire for more than forty years have been dusted up and brought up into the limelight once again.  In fact, on …….April 2007, the government signed an agreement with China for the construction of the Bui Dam on the Black Volta and the project was  scheduled to commence in June 2007.

In the wake of this devastating power rationing, there have been public calls for the adoption of the nuclear alternative. And they have had strong support from Ghana's leading scientist, Prof. Francis Allotey, who has made similar suggestions in the past. If there is one person who, more than any other, knows whether Ghanaian scientists will be able to manage a nuclear alternative, it is Prof. Allotey, counted by his peers among the topmost of the elite in the world of mathematics, physics and nuclear science.

As the Ministry of Energy works round the clock to find a long-term solution to the energy crisis, one of the best solutions is bringing up again is investment in power generation. Today, electric power in Ghana is produced from two main sources; hydro and thermal. Two hydro power plants have a total installed capacity of 1,180MW and there is an additional 550MW from thermal plants.  A shortfall of 250MW is supplied from imports from Cote d'Ivoire. The crisis has developed as a result of low water levels behind the Akosombo hydro dam which, by March, 2007, had forced a drastic reduction in power generation from 912MW to ...MW

Emergency mobile plants, flown in from the US in March, 2007, were put into service in April, and two more thermal plants are expected to add another 400MW by the end of August 2007. When the US$600m Bui project is commissioned, in four to five years, another 400MW will be added to the grid.

A nuclear power plant, however, is a medium to long term alternative and one could not be ready and producing before eight years, even if the long, tedious processes are set in motion now.

Demand for electric power in Ghana is projected to grow from the 2005 level of 1,400MW to about 3,500MW in 2020. The increase in capacity is expected to be financed mainly by the private sector and, where appropriate, the Ministry of Energy has been encouraging investors to adopt Build Own Operate and Transfer (BOOT) and other innovative financing arrangements.

Besides power generation, other investment prospects in are in petroleum exploration. Ghana's offshore sedimentary basin covering about 50,000km2 and the interior Voltain Basin of about 103km2 have remained largely unexplored. Ghana is part of the West African province, where giant oil and gas discoveries continue to be made, and there are clear indications of the existence oil and gas in the country.

Other areas of potential investment are crude oil refining, bulk petroleum products pipelines and storage, alternative transportation fuels such as biofuels and, with the anticipated commissioning of the West African Gas Pipeline in 2007, natural gas secondary market infrastructure, development of wind farms, manufacture of solar panels, and of electrical appliances and equipment, including cables, transformers, and lighting, such as compact fluorescent lamps (CFL).