ACCRA, Ghana, August 29, 2007.
Financing of US$212 million will support the development of renewable energies in Ghana.
The World Bank and the Global Environment Facility have approved the ‘Energy Development & Access’ project to increase electricity access, supply and reliability in the African country, where rolling blackouts and inaccessibility continue to impede economic growth.
Of the total project cost, the World Bank financing is comprised of a $90 million equivalent International Development Association credit over a 40-year period and a $5.5 million GEF grant. Other sources of financing include the Africa Catalytic Growth Fund ($50 million), African Development Bank ($18 million), Global Partnership on Output-based Aid ($6 million), Ghanaian Financial Intermediaries ($7.8 million) and Swiss Agency for Development & Cooperation ($11 million).
“The current energy crisis in Ghana is one of the key impediments to growth,” says Paivi Koljonen of the World Bank. “Improving overall sector management, and the access and reliability of electricity supplies are pressing needs for Ghana today, and the project is designed to address these.”
Ghana has made “tremendous efforts” to promote growth and development, and is on course to achieve the MDG goal of halving poverty in a year, but the country currently is facing major energy challenges which could have far-reaching political, social and economic repercussions, the report explains. There now is an urgent need for a long-term visionary approach to sector management, and the main objective of the Energy Development & Access project is to support long-term efforts aimed at enhancing renewable energy generation capacity, as well as improving the performance of power companies, increasing energy efficiency and scaling-up energy access to reduce inequity due to urban-rural imbalance.
In support of Ghana’s multi-faceted energy sector strategy, the project will provide grants to developers of green power projects using wind, biomass and small hydro, for the benefit of communities outside the main national grid system. It will also finance establishment of an independent Rural Electrification Agency, which will coordinate the connection of 134,000 new customers in rural towns and villages by the project's end.
Another component of the project is to improve the distribution of power supply and improve the sector’s commercial performance. It is estimated that 25% of total output is lost in the distribution process.
A major multinational energy project, the West Africa Gas Pipeline, is under construction and should bring Nigerian gas to Ghana next year. The gas would diversify Ghana’s hydro-based power system with thermal power.
Ghana has 20 million inhabitants with a per capita income of $450, which is 40% below the average of $745 for Sub-Saharan Africa. About 60% of the population lives in rural areas, where only 17% have access to electricity.
Rapid increase in power demand and low water inflows to the Akosombo and Kpong hydropower reservoirs has reduced hydropower output by 30%. The government is initiating the third phase of its electrification program, which includes plans to modernise its rural electrification policy to allow both grid-based and off-grid alternatives to coexist and complement each other. “In addition, the government wants to promote renewable energy alternatives in areas that are outside the reach of the national grid through innovative credit facility mechanisms that both lower the upfront cash cost of solar lighting equipment for consumers and improve the business environment for small energy entrepreneurs,” the report notes.
The project has incorporated “experience and lessons learned from past GEF PV projects in Ghana and elsewhere” and the fee-for-service model to deliver SHS in Ghana under the UNDP/GEF “was not financially sustainable for the service providers because the monthly charges were too low to cover the operating and maintenance costs of the SHS,” the report explains. “A lesson learned from a recent DANIDA supported solar project was that rural banks should participate in the program design from the very beginning. The project has incorporated this lesson by involving the rural banks at the preparation stage.”
The project has also incorporated the lessons learned from a successful program in Sri Lanka, which used IDA re-financing to provide long-term financing and credit to renewable energy projects. The project design incorporates lessons learned from the China Renewable Energy Development Program, where small-scale SHS systems are the dominant solar products for the ‘dealer credit sales model’ given the low ability to pay in rural areas.
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