272019Aug
The development of a solar photovoltaic market in Ghana

The development of a solar photovoltaic market in Ghana

Solar energy is poised to become an important source of renewable energy in Ghana. The nation has good solar power potential, with solar irradiation levels ranging between 4.5 to 6.0 kWh/m2 per day. Following international trends, in the last three years, solar power in Ghana attracted more investment than any other power technology. In this article, we discuss the enabling framework in Ghana for the increasingly popular solar photovoltaic (PV) power solutions and consider any issues and stumbling blocks with respect to their use.

The right climate

Ghana’s abundant solar power potential has been identified as the security needed to improve the reliability of power supply in a power sector where thermal plants have increased importance during dry spells, and hydro plants become overburdened when thermal plants experience availability challenges.

A significant amount of work has gone into developing an enabling environment for solar PV plants. The renewable energy goal in the National Energy Policy is to “increase the proportion of renewable energy in the total national energy mix and ensure its efficient production and use”. The policy objective is to be achieved by the Government ensuring that renewable energy constitutes 10% of the national energy mix by 2030, and by imposing a mandatory purchase obligation on offtakers.

The National Energy Policy is supplemented by the investment-focused Renewable Energy Master Plan, which aims to increase Ghana’s renewable energy installed capacity to approximately 2,500 MW by 2030. These policy objectives are given legal basis by the Renewable Energy Act, 2011 (Act 832). Among other things, the Act:

  • guarantees the sale of electricity generated from renewable energy sources;
  • guarantees the sale price of renewable energy;
  • creates the Renewable Energy Fund;
  • sets the stage for the establishment of the Renewable Energy Authority; and
  • led to the publishing of guidelines for connecting renewable energy plants to the distribution system.

The increased interest in solar systems can be attributed in the main to the reduced cost of solar technologies, low maintenance requirements and ability to produce power without fuel. The decision to invest in a solar system that reduces energy uncertainty and pays for itself in a short amount of time is not a difficult one to make. For grid-tied solutions, a bonus is the opportunity to sell excess power generated to the grid (and thus not require storage) at the price given to independent power producers.

Leading by example, the Government has begun switching Government buildings and public institutions to solar power under the “Solar Rooftop Programme”. A solar PV rooftop system is to be installed at Jubilee House, the official residence and workplace of the President, by the end of August 2019. Also, a residential initiative providing a subsidy for the purchase and installation of solar PV systems was initiated in 2016. The supply, installation, and maintenance of the solar panels for the programme is expected to generate good investment opportunities for the private sector.

From energy deficit to energy surplus

Over the past three years, Ghana has resolved its energy deficit largely due to improved fuel security and investment in additional power generation. The projected energy surplus at the end of 2019 is over 1,000 MW and it is expected that, in 2025, Ghana’s energy surplus will be at least 500 MW. (source: Power Africa Transmission Roadmap to 2030: A Practical Approach To Unlocking Electricity Trade). The main concern for the Ghanaian energy sector has shifted from a lack of generation capacity to matching projected capacity to projected demand.

The Energy Commission (the regulator responsible for, among other things, the licensing of power producers) has therefore suspended the issuance of wholesale electricity supply licences and permits in respect of utility-scale grid-connected solar PV plants. This follows a capacity restriction of 20MWp per individual plant and 150MWp aggregate imposed in October 2014 on solar PV plants without storage systems that were to be connected to the national transmission system. The purpose of the restriction was to manage the technical challenges that fluctuating power generation from solar PV power plants pose to grid stability.

Stumbling blocks

No licence for C&I PV installations

Despite the development of substantial regulatory infrastructure for solar PV power generation, there is still some regulation required. A wholesale electricity supply licence (“WESL”) is required for the sale of electricity. At this time, a WESL may only be issued to a person who intends to supply electricity to either a distribution utility or a bulk customer (i.e. any consumer of electricity with a maximum demand of at least 500KVA consistently for three consecutive months or minimum annual energy consumption of 1 million kWh). 

Most C&I PV installations do not qualify for a WESL. They cannot enter into a power purchase arrangement with a distribution utility because of the policy decision not to issue any new WESLs and, more often than not, their non-distribution utility offtaker does not meet the consumption threshold to be categorized as a bulk customer. Even though companies providing C&I PV solutions do not qualify for a WESL, they would be in breach of the law if they generated, distributed or sold electricity. The business models available to developers who wish to retain ownership of the C&I PV technology that they install on clients’ sites are either an outright sale or asset/equipment financing arrangements, neither of which is attractive as they change fundamentally the nature of the business. 

False start to net metering

In 2015, net metering was introduced in Ghana through the Net Metering Sub-Code for Connecting Renewable Energy Generating Systems to the Distribution Network in Ghana (“the Sub-Code”). The Sub Code was received well as it was another positive development for the goal of secure power supply. In theory, the system owner must be credited for electricity supplied to the distribution system and, at the end of each billing cycle, any credit must be offset against electricity purchased by the system owner. The reality is that, though the system owner is credited for electricity supplied to the distribution system and the credit is stated on the invoice issued to the system owner, the credit amount is not netted off against the system owner’s grid-supplied electricity usage. The system owner is charged for all electricity purchased.

There has been no statement from the Energy Commission on whether the credit expiry date per the Sub-Code will be frozen whilst net metering is not operational. The Sub-Code states that electricity supply credits accrued shall lapse at the end of one calendar year. Also, there are rumblings that the distribution companies are asking that the tariff for power produced by system owners should be lower than the rate for independent power producers.

Once the net-metering system is fully operational, individuals and companies who invested in grid-connected solar PV installations will enjoy the benefit of offsetting their electricity bills against excess power fed into the grid. Until then, grid-connected solar PV installations are being turned into captive systems.

Final thoughts

The absence of a clear roadmap to implementation of the net-metering policy and the still unresolved matter of licensing C&I PV companies are dampening interest and investment in solar PV systems. However, the main barrier to entry in the Ghana solar PV market is the freeze on the issuance of electricity production licences and, when the ban is over, the implications of the new local content and participation laws.  

Article compiled by: Araba Attua-Afari, Senior Assosicate at Ghanaian member firm Bentsi-Enchill, Letsa & Ankomah

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