‘Invest in energy systems … not subsidies’ – Gov’t advised

Government continues to subsidise energy consumed in the country to the neglect of the required investment to ensure efficiency. Charles Benoni Okine reports

A Senior Research Fellow at the Institute of Statistics, Social and Economic Research (ISSER), Dr Robert Darko-Osei, has waded into the energy subsidy debate with a call on the government to stop the practice because “it is not sustainable”.

Instead he has suggested to the government to channel the subsidies into investment into the sector to address the serious inefficiencies in the system and reduce the need for the subsidies.

Dr Darko-Osei made the call in an interview with the GRAPHIC BUSINESS which wanted to know the way forward to addressing the major energy challenges in the country and whether the continuous subsidization of the sector was sustainable.

“No, subsidisation is not sustainable. However there is the need to invest more in the sector generally to make it more efficient and reduce the need for subsidies”, he said. 

There is presently a raging debate over the subsidies on energy by the state which some experts maintain was not the best of decisions by the government in view of the cost to the nation.

There are reports that the generation of power presently costs about eight cents per every kilowatt hour while this is sold to the public at only four cents per kilowatt hour.

The situation is said to be leaving huge debt on the state-run agency, Volta River Authority (VRA) among others leaving them incapable of maintaining their systems let alone replace worn-out ones to enhance their efficiency.

According to Dr Kwabena Donkoh, Chairman of the parliamentary Select Committee on Energy, the situation has become dire and stressed the need for urgent measures to address the situation through an increase the tariffs paid by consumers.

Speaking on an Accra-based radio station last week, he argued that further delays could cause system failures which will in the end aggravate the already bad situation in the country.

Meanwhile, a former Chief Executive Officer of the VRA, Dr Wireko-Brobbey, on the same platform, disagreed with Dr Donkoh and indicated that, there was the need for the utility agencies to justify why they needed tariff increases when they continue to provide sub-standard services to the public.

While agreeing to an increase in tariffs at a certain time, he maintained that the onus was on the utilities to convince the Public Utilities and Regulatory Commission (PURC) to heed their request.

The back and forth arguments raises the dilemma about the ‘chicken and egg’ question, a situation which elicits divergent opinions from the public including the academia as to which should be first.

Some members of the public have also argued that until the government is able to honour its obligation by releasing the subsidies on time for the utilities to be able to address their challenges, the problems would persist unabated and to the disadvantage of the larger public.

Others are also of the view that there was the need for the government to take its hands off the pricing and use the money for capital expenditures that would rather inure to the benefit of the larger populace.

According to them, Ghanaians would be better off with efficient services at a higher price than to have substandard services at a lower cost because in the long run, they lose out.

Independent Power Producers

Ghana has been described as a major attraction for investors because of the prevailing economic conditions but independent power producers (IPP) are shying away from the country.

According to Dr Darko-Osei, the only way to attract such investors is that  “We need to get the pricing right”.  

“For instance, any IPP that comes to Ghana today will require the use of Gas and/or LNG; I believe there are challenges with respect to the capacity of the West Africa Gas Pipeline (WAGP) so that even if it comes on stream, an IPP is not sure of getting supply”, he said.

 “Now if the IPPs decide to import the gas themselves, it surely should be reflected in the price of the power that they produce; Also we need a credible off taker. If an IPP gets around all the input supply hurdles and produces power, they must have some assurance that somebody will take the power and pay realistic prices for it”, he said. 

Asked whether the IPPs could help solve the power situation in the country he replied “I think IPPs will be critical to the future of power generation in Ghana. So, if we can make it attractive for them, then I believe they hold the answer to the future of power in Ghana”. 

As to whether the people be worried, should they come in at all Dr Darko-Osei replied that “Of course IPPs becoming important players in the sector has to be supported by a strong regulator so that you do not get an oligopoly outcome where consumers are over charged for power. I think the current regulator is well equipped but will still need an upscale of its capacity”.