The Implications of Changing Power Generation Mix on Energy Pricing and Security in Ghana

Despite almost a decade of strong economic growth, Ghana still lags behind in its ability to generate enough power to catalyse this growth. The rapid deceleration in economic activity over the past three years has been primarily due to persistent energy supply constraints and rising energy-related input costs to production. The ripple effect of this on the economy has been damning as the load-shedding programme, locally referred to as ‘dumsor,’ continues to severely impact industry profitability, liquidity, efficiency, productivity and costs. This article analyses the implications of the changing power generation mix for electricity pricing in Ghana taking into account new capacity additions to the generation mix and tariff pricing structure.Based on the number of new power purchase agreements signed with IPPs, we find that thermal generation will continue to form the backbone of Ghana’s energy mix in the medium term over the next five to ten years. But this also implies the need for cost-reflective tariffs in line with this new generation mix assuming import parity domestic gas prices are maintained.