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Ghana's Energy Sector Facing $1.5 Billion Annual Losses, Lawmaker Alarms

Ghana's Energy Sector Grapples with Massive Annual Losses: Ato Forson Sounds the Alarm

In a stark revelation that underscores the precarious state of Ghana's energy infrastructure, Minority Leader in Parliament, Cassiel Ato Forson, has highlighted the sector's dire financial hemorrhaging, estimating annual losses exceeding $1.5 billion. This alarming figure paints a picture of systemic inefficiencies, mounting debts, and operational challenges that have plagued the industry for years, threatening the nation's economic stability and energy security. Forson's comments, delivered during a parliamentary session, serve as a clarion call for urgent reforms and accountability, shedding light on how mismanagement and policy missteps have exacerbated the crisis.

At the heart of Forson's critique is the assertion that the energy sector has been "bleeding" profusely, with losses accumulating at a rate that could cripple Ghana's fiscal health if left unaddressed. He attributes this to a combination of factors, including escalating debts owed to independent power producers (IPPs), inefficiencies in power distribution, and the lingering effects of past power outages, commonly known as "dumsor." These outages, which gripped the country intermittently over the past decade, not only disrupted daily life and industrial productivity but also led to significant revenue shortfalls for state-owned entities like the Electricity Company of Ghana (ECG) and the Volta River Authority (VRA).

Delving deeper into the numbers, Forson emphasized that the $1.5 billion annual loss figure is not an exaggeration but a conservative estimate based on audited reports and financial statements from key sector players. This includes unpaid bills to fuel suppliers, maintenance backlogs for aging infrastructure, and the high cost of emergency power procurement during peak demand periods. For instance, Ghana's reliance on thermal power plants, which require expensive fuel imports, has been a major drain on resources, especially amid fluctuating global oil prices. The sector's debt portfolio has ballooned, with estimates suggesting that ECG alone owes billions in legacy debts, some dating back to previous administrations. This debt trap has created a vicious cycle where utilities struggle to invest in upgrades, leading to further inefficiencies and losses.

Forson's statements come at a time when Ghana is navigating broader economic challenges, including inflation, currency depreciation, and the aftermath of the COVID-19 pandemic. The energy sector, as a cornerstone of the economy, directly impacts manufacturing, agriculture, and household consumption. When power supply is unreliable, industries face downtime, resulting in lost productivity and job cuts. Small and medium-sized enterprises (SMEs), which form the backbone of Ghana's economy, are particularly vulnerable, often resorting to costly generators that inflate operational expenses. Forson pointed out that these losses translate into higher electricity tariffs for consumers, burdening ordinary Ghanaians who are already grappling with rising living costs.

To provide context, it's essential to trace the roots of this crisis. Ghana's energy woes can be linked to the rapid expansion of power generation capacity under initiatives like the Millennium Challenge Compact, which aimed to boost supply but sometimes overlooked long-term sustainability. While the country has made strides in increasing installed capacity—now exceeding 5,000 megawatts from a mix of hydro, thermal, and renewable sources—the distribution network remains outdated and prone to technical losses. Transmission losses alone account for a significant portion of the inefficiencies, with estimates from the Energy Commission indicating that up to 25% of generated power is lost before reaching end-users due to poor infrastructure and theft.

Forson didn't mince words in assigning blame, criticizing what he described as "reckless borrowing and poor governance" under the previous administration. He argued that the accumulation of these losses was not inevitable but a direct result of policy failures, such as entering into unfavorable take-or-pay contracts with IPPs. These contracts obligate the government to pay for power even if it's not needed, locking in financial commitments that strain the national budget. In his parliamentary address, Forson called for a forensic audit of all energy sector deals to uncover any irregularities and hold accountable those responsible for the mismanagement.

The implications of these revelations extend beyond immediate financial concerns. Environmentally, Ghana's heavy dependence on fossil fuels for thermal power contributes to carbon emissions, complicating the country's commitments under international climate agreements like the Paris Accord. Forson advocated for a shift towards renewables, such as solar and wind, which could not only reduce costs but also create jobs in emerging green industries. He referenced successful models in neighboring countries like Kenya, where solar farms have helped stabilize energy supply and lower losses.

Public reaction to Forson's disclosures has been mixed but largely supportive among opposition circles and civil society groups. Energy experts, including those from think tanks like the Africa Centre for Energy Policy (ACEP), have echoed his concerns, noting that without decisive action, the sector could face collapse. They recommend measures such as debt restructuring, improving revenue collection through smart metering, and enhancing regulatory oversight by bodies like the Public Utilities Regulatory Commission (PURC).

Government officials, however, have pushed back against Forson's narrative, defending their record by pointing to investments in infrastructure and efforts to diversify energy sources. They argue that global factors, including the Russia-Ukraine conflict's impact on fuel prices, have compounded domestic challenges. Yet, Forson countered that while external shocks play a role, internal inefficiencies are the primary culprits, urging a bipartisan approach to salvage the sector.

Looking ahead, the path to recovery demands comprehensive reforms. Forson proposed a multi-pronged strategy: first, renegotiating IPP contracts to eliminate wasteful clauses; second, investing in grid modernization to cut transmission losses; and third, promoting energy efficiency programs to reduce demand-side waste. He also stressed the need for transparency in tariff setting, ensuring that any price adjustments are justified and equitable.

In essence, Ato Forson's exposé on the energy sector's $1.5 billion annual losses serves as a wake-up call for Ghana. It highlights the urgent need for fiscal prudence, innovative policies, and collaborative governance to staunch the bleeding and secure a sustainable energy future. As the nation stands at this crossroads, the decisions made today will determine whether Ghana can harness its energy potential for growth or continue to suffer the consequences of neglect. With elections on the horizon, this issue is likely to feature prominently in political discourse, influencing voter priorities and policy agendas. The energy sector's revival is not just an economic imperative but a national one, essential for powering Ghana's aspirations towards middle-income status and beyond.

Read the Full Ghanaweb.com Article at:
[ https://www.ghanaweb.com/GhanaHomePage/business/Energy-sector-was-bleeding-with-over-1-5-billion-annual-losses-Ato-Forson-1993153 ]