renewable energy deployment in ghana: …
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RENEWABLE ENERGY DEPLOYMENT IN GHANA:
SUSTAINABILITY BENEFITS AND POLICY IMPLICATIONS
by
Kenneth Kofiga Zame
A dissertation submitted to the Faculty of the University of Delaware in partial
fulfillment of the requirements for the degree of Doctor of Philosophy in Energy and
Environmental Policy
Winter, 2016
© 2016 Kenneth Kofiga Zame
All Rights Reserved
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RENEWABLE ENERGY DEPLOYMENT IN GHANA:
SUSTAINABILITY BENEFITS AND POLICY IMPLICATIONS
by
Kenneth Kofiga Zame
Approved: __________________________________________________________
Lawrence Agbemabiese, Ph.D.
Professor in charge of dissertation on behalf of the Advisory Committee
Approved: __________________________________________________________
John Byrne, Ph.D.
Director of the Center for Energy and Environmental Policy
Approved: __________________________________________________________
Babatunde Ogunnaike, Ph.D.
Dean of the College of Engineering
Approved: __________________________________________________________
Ann Ardis, Ph.D.
Interim Vice Provost for Graduate and Professional Education
I certify that I have read this dissertation and that in my opinion it meets
the academic and professional standard required by the University as a
dissertation for the degree of Doctor of Philosophy.
Signed: __________________________________________________________
Lawrence Agbemabiese, Ph.D.
Professor in charge of dissertation
I certify that I have read this dissertation and that in my opinion it meets
the academic and professional standard required by the University as a
dissertation for the degree of Doctor of Philosophy.
Signed: __________________________________________________________
Young-Doo Wang, Ph.D.
Member of dissertation committee
I certify that I have read this dissertation and that in my opinion it meets
the academic and professional standard required by the University as a
dissertation for the degree of Doctor of Philosophy.
Signed: __________________________________________________________
Lado Kurdgelashvili, Ph.D.
Member of dissertation committee
I certify that I have read this dissertation and that in my opinion it meets
the academic and professional standard required by the University as a
dissertation for the degree of Doctor of Philosophy.
Signed: __________________________________________________________
Joseph Essandoh-Yeddu, Ph.D.
Member of dissertation committee
iv
ACKNOWLEDGMENTS
I would like to extend my gratitude to the many people who helped to bring
this dissertation to fruition. First, I would like to thank my dissertation Committee
Chair - Dr. Lawrence Agbemabiese, for the valuable guidance and support throughout
this dissertation research. I would also like to thank the dissertation Committee
Members, Dr. Young-Doo Wang, Dr. Lado Kurdgelashvili, and Dr. Joseph Essandoh-
Yeddu, I am gratefully indebted to them for their very valuable comments which have
helped in shaping this dissertation.
Many thanks to Dr. John Byrne – the Director of the Center for Energy and
Environmental Policy (CEEP), and all the Faculty at CEEP for their contributions
towards my studies at the University of Delaware in diverse ways. Many thanks to my
many colleagues at the Center for Energy and Environmental Policy at the University
of Delaware for their encouragement, numerous conversations, and help in the past
years.
I would also like to express my very profound gratitude to my friends and
family; parents, siblings and to my wife Francoise for their immeasurable patience
during these years of studies, and also for providing me with unfailing support and
continuous encouragement throughout. This accomplishment would not have been
possible without them.
Finally, I would like to thank God Almighty to whom I owe all things. Glory
and honor be to his name now and fore ever.
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TABLE OF CONTENTS
LIST OF TABLES ........................................................................................................ ix
LIST OF FIGURES ....................................................................................................... xi LIST OF ABBREVIATIONS ..................................................................................... xiii ABSTRACT .............................................................................................................. xviii
Chapter
1 INTRODUCTION .............................................................................................. 1
1.1 Statement of Research ............................................................................... 1
1.2 Research Questions ................................................................................... 3
1.3 Research Framework ................................................................................. 4
1.3.1 The Concept of Sustainability ....................................................... 5 1.3.2 Renewable Energy and Sustainability ......................................... 10 1.3.3 The Concept of Renewable Energy Prosumers ........................... 16
1.3.4 Emergence of Prosumerism: A Complex Adaptive System
Perspective ................................................................................... 21
1.3.5 Research Design .......................................................................... 24
1.4 Summary of Methodology ....................................................................... 28
1.4.1 Method of Estimating Jobs Creation ........................................... 28
1.4.2 Method of Estimating Water Savings .......................................... 31
1.4.3 Method of Estimating CO2 Emissions ......................................... 33
1.5 Limitations of the Study .......................................................................... 35 1.6 Chapter Abstracts .................................................................................... 36
2 LITERATURE REVIEW ................................................................................. 39
2.1 Renewable Energy Value Creation ......................................................... 39
2.1.1 Economic Value Creation ............................................................ 40
2.1.2 Environmental Value Creation .................................................... 46 2.1.3 Social Value Creation .................................................................. 47
2.1.4 Energy Efficiency Value Creation ............................................... 48 2.1.5 Role of Local Content Requirements .......................................... 51 2.1.6 Value Creation from Prosumers .................................................. 52
2.2 Barriers to Renewable Energy Deployment ............................................ 54
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2.2.1 Inception Phase Challenges and Barriers .................................... 56 2.2.2 Take-Off Phase Challenges and Barriers .................................... 57
2.2.3 Consolidation Phase Challenges .................................................. 58
2.3 Renewable Energy Policy Instruments .................................................... 58
2.3.1 Regulations and Standards .......................................................... 59 2.3.2 Quantity Instruments ................................................................... 61 2.3.3 Price Instruments ......................................................................... 63
2.3.3.1 Fiscal Instruments ......................................................... 64 2.3.3.2 Feed-in-Tariff Policy .................................................... 68
2.4 Barriers to Energy Efficiency .................................................................. 70
2.4.1 Market Failures ............................................................................ 71
2.4.2 Behavioral Barriers ...................................................................... 72 2.4.3 Additional Market Barriers .......................................................... 73
2.5 Energy Efficiency Policy Instruments ..................................................... 74
2.5.1 Regulatory Instruments ............................................................... 74 2.5.2 Information Instruments .............................................................. 77
2.5.3 Market-Based Instruments ........................................................... 78 2.5.4 Public Sector Energy Efficiency Measures ................................. 79
2.6 Socioeconomic Benefits of Renewable Energy in Africa ....................... 80
2.6.1 South Africa ................................................................................. 81
2.6.2 Kenya ........................................................................................... 85 2.6.3 Mauritius ...................................................................................... 86 2.6.4 Summary Lessons on Country Case Studies ............................... 87
3 ENERGY IN THE GHANAIAN CONTEXT .................................................. 90
3.1 Demography and Population ................................................................... 90 3.2 Climatic Conditions ................................................................................. 91
3.3 Energy, Water, and Climate Change ....................................................... 93
3.3.1 Energy and Climate Change ........................................................ 94
3.3.2 Water for Electricity .................................................................... 97
3.4 Energy and Development ........................................................................ 98 3.5 Regional Energy Context ...................................................................... 100 3.6 Ghana’s Energy Overview .................................................................... 106
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3.6.1 Demand and Supply .................................................................. 106 3.6.2 Power Sector, Key Stakeholders, and Institutional
Arrangements ............................................................................ 110 3.6.3 Energy Sector Development Partners ........................................ 114
3.7 Major Power Supply Challenges ........................................................... 116 3.8 Renewable Energy Potential .................................................................. 118 3.9 Renewable Energy Policies and Strategies ............................................ 124
3.10 Energy Efficiency Policies and Strategies ............................................. 130 3.11 Renewable Energy Deployment Barriers .............................................. 133
3.11.1 Technical and Infrastructure Barriers ........................................ 133
3.11.2 Financial and Economic Barriers .............................................. 134 3.11.3 Regulatory Barriers ................................................................... 137 3.11.4 Institutional and Administrative Barriers .................................. 138
4 ESTIMATED BENEFITS AND COST ......................................................... 140
4.1 Scope of Scenarios and Key Factors ..................................................... 140
4.1.1 Description of Scenario Types .................................................. 142
4.1.2 Business as Usual (BAU), Reference Scenario ......................... 144 4.1.3 Sustainable Energy Deployment (SED) Scenario ..................... 146 4.1.4 Renewable Energy Revolution (REV) Scenario ....................... 147
4.2 Analysis of Benefits .............................................................................. 149
4.2.1 Analysis of Direct Employment ................................................ 150 4.2.2 Effect of Local Manufacturing on Employment ....................... 158 4.2.3 Analysis on Water Savings ........................................................ 161
4.2.4 Analysis on Emissions Reductions ............................................ 163 4.2.5 Analysis of Energy Efficiency ................................................... 164
4.3 Cost Estimates of Capacity Additions in Scenarios. ............................. 168
5 DISCUSSIONS AND POLICY RECOMMENDATIONS............................ 172
5.1 Potential Benefits of Renewables in Ghana .......................................... 173
5.1.1 Economic ................................................................................... 173 5.1.2 Environmental ........................................................................... 176 5.1.3 Energy Security and Social Equity ............................................ 178
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5.2 Policy Suggestions towards Sustainable Energy Deployment in
Ghana ..................................................................................................... 179
5.2.1 A Hybrid REFIT-RPS Policy Strategy ...................................... 180 5.2.2 Promoting Prosumers within the RFIT-RPS Hybrid Policy ...... 185 5.2.3 Energy Efficiency Policy Recommendations ............................ 187 5.2.4 Departure from Conventional Utilities ...................................... 190
5.2.4.1 How is Ghana’s Renewable Energy System
Transition to Take Place? ........................................... 191 5.2.4.2 The Role of Mini-Grid and Stand Alone Renewable
Energy Systems .......................................................... 194
6 CONCLUSION AND RECOMMENDED FURTHER RESEARCH ........... 197
6.1 Conclusion ............................................................................................. 197 6.2 Recommended Further Research ........................................................... 199
REFERENCES ........................................................................................................... 202
Appendix
A EMPLOYMENT FACTORS (FOR OECD COUNTRIES) ........................... 222 B REGIONAL JOB MULTIPLIERS FOR AFRICA (Rutovitz & Harris,
2012). ..................................................................................................... 222
C EMPLOYMENT FACTOR DECLINE RATE (%) BY TECHNOLOGY. ... 223
D SUMMARY OF APPROACH TO ESTIMATING DIRECT ENERGY
EMPLOYMENT ................................................................................... 223 E WATER COMSUMPTIVE FACTORS FOR INPUT FUELS
PRODUCTION ..................................................................................... 224 F WATER CONSUMPTIVE FACTORS FOR ELECTRICITY
GENERATION (m3/MWh) .................................................................. 224
G ENERGY AND CARBON CONTENT FOR FOSSIL FUELS..................... 225 H ANALYSIS PROCEDURE FOR CO2 ........................................................... 225
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LIST OF TABLES
Table 1.1: National Sustainable Development Strategy (NSDS) Principles. ................. 7
Table 2.1: Potential Value Creation along the Stages of Development of
Renewables. ............................................................................................. 46
Table 2.2: Common Tax Incentives for Renewable Energy. ....................................... 65
Table 3.1: Ghana’s Total Greenhouse Gas Emissions by Sectors. ............................... 94
Table 3.2: Ghana's Energy Indicators (1990-2012) .................................................... 107
Table 3.3: Electricity Import, Export, and Net Import from 2005 – 2014 (in GWh). 108
Table 3.4: Installed Electricity Generation Capacity as of December 2014 .............. 109
Table 3.5: Analyzed Wind Speed Measurements for Ghana. .................................... 120
Table 3.6: Renewable Energy Development Strategies and Policies in Ghana. ........ 124
Table 3.7: Technology Specific Feed-in-Tariff of Ghana
(Effective October, 2014). ..................................................................... 126
Table 3.8: Prevailing Non-Residential Electric Tariff for Ghana (2014 and 2015). .. 127
Table 3.9: Ghana's Energy Efficiency Performance Standards (as of 2013). ............ 131
Table 4.1: Scenario Types and Brief Descriptions. .................................................... 143
Table 4.2: Distribution of Added Capacity in BAU Scenario (2015 to 2035). .......... 145
Table 4.3: Distribution of Total Added Generation Capacity in SED Scenario. ....... 146
Table 4.4: Distribution of Total Added Generation Capacity in REV Scenario ........ 148
Table 4.5: Renewable Capacity in REV and SED scenarios and the Differences
between the REV and SED Scenario’s Installed Renewables
Capacities. ............................................................................................. 149
Table 4.6: Direct Employment-based on the BAU, SED, and REV for Manufacturing,
Construction & Installations, and Operation & Maintenance (2015 to
2035). ..................................................................................................... 154
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Table 4.7: Grid on Sensitivity of Solar Manufacturing to Percentage of Local
Manufacturing and Solar Capacity (in MW). ........................................ 159
Table 4.8: Manufacturing Jobs per 1% Increase in Local Manufacturing. ................ 161
Table 4.9: Net Energy Efficiency Improvements Grid BAU, SED and REV scenarios
(over the period 2015 to 2035). ............................................................. 166
Table 4.10: Employment from Energy Efficiency Investment in the USA, 2004. .... 167
Table 4.11: Sectoral Split of Energy Efficiency Gains Used in Computing the
Weighted Average Employment per GWh for Ghana. ......................... 168
Table 4.12: Energy Efficiency Jobs Created from the BAU, SED and REV Scenarios
(2015 to 2035). ...................................................................................... 168
Table 4.13: Data on Cost of New Electricity Generating Technologies. ................... 169
Table 4.14: Capital Cost, Fixed O&M, and Fuel Cost at the End of 2035 Estimated at
a Real Discount Rate of 10% for all Three Scenarios. .......................... 170
Table 5.1: FIT and RPS Policy Virtues and Design Traits. ........................................ 182
Table 5.2: Comparative Advantages of FIT and RPS policies (Davies, 2012). ......... 183
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LIST OF FIGURES
Figure 1.1: Research Design for Analyzing Sustainable Socioeconomic Benefits of
Renewable Energy Deployment. ............................................................. 25
Figure 1.2: Quantitative Impact Assessment Methods (Gross and Net Studies) ......... 29
Figure 2.1: Life Cycle of a Renewable Energy Technology ........................................ 40
Figure 2.2: The Economic Opportunity Value Chain of Energy Efficiency ................ 49
Figure 2.3: The Interconnectedness of Barriers to Renewable Energy Deployment. .. 55
Figure 2.4: Deployment Phases of Renewable Energy Technology and Associated
Barriers. ................................................................................................... 56
Figure 3.1: Map of Ghana ............................................................................................ 91
Figure 3.2: Contribution of Gases to Ghana's Total National Emission in 2012. ........ 95
Figure 3.3: WAGP Pipelines. ..................................................................................... 102
Figure 3.4: Ghana's Power Sector Structure ............................................................... 111
Figure 3.5: Solar Irradiation Map of Ghana. .............................................................. 119
Figure 3.6: Ghana Small Hydro Potential Map. ......................................................... 121
Figure 3.7: Effects of Internalizing Externalities into the Pricing of Renewable and
Conventional Energy Technologies. ..................................................... 136
Figure 4.1: Total Cumulative Employment from BAU, SED and REV scenarios based
on projected installed capacities and technologies (2015 to 2035). ...... 150
Figure 4.2: Percentage Employment from Renewables and Non-Renewable by
Scenarios (2025 and 2035). ................................................................... 151
Figure 4.3: Percentage of Installed Cumulative capacity from Renewable and Non-
Renewable Power Technologies. ........................................................... 152
Figure 4.4: Direct Employment for the Three Scenarios (BAU, SED, and REV) at
2025 and 2035 by Technology. ............................................................. 153
Figure 4.5: Construction and Installation (C&I) Employment for BAU, SED and REV
Scenarios (2015 to 2035). ...................................................................... 155
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Figure 4.6: Operation and Maintenance (O&M) Jobs for BAU, SED and REV
Scenarios (2015 to 2025). ...................................................................... 156
Figure 4.7: Number of Manufacturing Employment for BAU, SED and REV
Scenarios (2015 to 2035). ...................................................................... 157
Figure 4.8: Effect of Increasing Solar PV Capacity (in MW) and Percentage Local
Manufacturing on Manufacturing Jobs. ................................................ 160
Figure 4.9: Water for Electricity Generation in BAU, SED and REV Scenarios from
2015 to 2025. ......................................................................................... 162
Figure 4.10: Carbon Dioxide Emissions Associated with BAU, SED and REV
Scenarios from 2015 to 2035. ................................................................ 164
Figure 4.11: Projected Unchecked Electricity Capacity Growth Compared with
Scenarios (BAU, SED, and REV) with Energy Efficiency
Improvements. ....................................................................................... 165
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LIST OF ABBREVIATIONS
ACEEE - American Council for an Energy-Efficient Economy
AEEI - Autonomous Energy Efficiency Improvement
AFD - Agence Française de Développement
AfDB - African Development Bank
BAU - Business as Usual
BECs - Building energy codes
BOS - Balance of System
BPA - Bui Power Authority
CAS - Complex Adaptive System
CEL - CENIT Energy Ltd
CFL - Compact Fluorescent Light
CH4 - Methane
C&I - Construction and Installation
CO2 - Carbon dioxide
CSP - Concentrating Solar Power
DAC - Development Assistant Committee
EC - Energy Commission
ECG - Electricity Company of Ghana
ECOWAS - Economic Community of West African States
ECOWREX - ECOWAS Observatory for Renewable Energy and Energy Efficiency
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ECREEE - ECOWAS Centre for Renewable Energy and Energy Efficiency
EDRs - Economic Development Requirements
EE - Energy Efficiency
EER - Energy Efficiency Ratio
EREF - ECOWAS Renewable Energy Facility
EREP - ECOWAS Renewable Energy Policy
EU- European Union
FIT - Feed-in-Tariff
GDP - Gross Domestic Product
GEALSP - Ghana Electrical Appliance Labelling and Standards Program
GEDAP - Ghana Energy Development and Access Project
GEF - Global Environment Facility
Gg - Gigagram (= 109 g)
GHG - Greenhouse Gas
GIZ - Gesellschaft für Internationale Zusammenarbeit
GJ - Gigajoules
GRIDCo - Ghana Grid Company
GSNC - Ghana's Second National Communication
GWh - Gigawatts-Hour
HVAC - Heating Ventilating and Air Conditioning
KfW - Kreditanstalt für Wiederaufbau
KIPP - Kpone Independent Power Project
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KTPP - Kpone Thermal Power Plant
KWh - Kilowatt-Hour
LCOE - Levelized Cost of Energy
LCR - Local Content Requirement
IPP - Independent Power Producers
IRENA - International Renewable Energy Agency
IRP - Integrated Resource Plan
ISU - International Solar Utilities
ITCZ - Inter-Tropical Convergence Zone
MCC - Millennium Challenge Corporation
MEPS - Minimum Energy Performance Standards
MOEP - Ministry of Energy and Petroleum
MRP - Mines Reserve Plant
MW - Megawatts
NCCPF - National Climate Change Policy Framework
NEDCo - Northern Electricity Distribution Company
NES - National Electrification Scheme
NG - Natural Gas
N2O - Nitrous Oxide
NO2 - Nitrogen Dioxide
NSDS - National Sustainable Development Strategy
OECD - Organization for Economic Co-operation and Development
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O & M - Operation and Maintenance
OWE - Ocean Wave Energy
PPA - Power Purchase Agreement
PURC - Public Utilities Regulatory Commission
PURPA - Public Utilities Regulatory Policies Act
PV - Photovoltaic
REC - Renewable Energy Certificate
RE - Renewable Energy
REFIT-RPS - Renewable Energy Feed-in-Tariff – Renewable Portfolio Standard
REIPPPP - Renewable Energy Independent Power Producer Procurement Program
REV - Renewable Energy Revolution
RPS - Renewable Portfolio Standard
SAPP - Sunon-Asogli Power Plant
SCC - Social Cost of Carbon
SECO - State Secretariat for Economic Affairs
SED - Sustainable Energy Deployment
SEU - Sustainable Energy Utility
SNEP - Strategic National Energy Plan
SO2 - Sulfur dioxide
SREC - Solar Renewable Energy Credit
STS - Solar Thermal System
TAPCO - Takoradi Power Company
xvii
TE - Transactive Energy
TGC - Tradable Green Certificate
TICO - Takoradi International Company
TT1P - Tema Thermal Plant 1
UNCED - United Nations Conference on Environment and Development
UNDESA - United Nations Department of Economic and Social Affairs
UNDP – United Nations Development Program
UNEP - United Nations Environmental Program
UNFCCC - United Nations Framework Convention on Climate Change
VALCO - Volta Aluminum Company
VAT - Value Added Tax
VRA - Volta River Authority
WAGP - West African Gas Pipeline
WAPCo - West Africa Pipeline Company
WAPP - West Africa Power Pool
WB – World Bank
WECD - World Commission on Environment and Development
xviii
ABSTRACT
Rapid growth in demand for electricity, coupled with inadequate power
generation capacity has plagued Ghana with electric power supply challenges in recent
years. This situation has resulted in rationing of electricity and is adversely impacting
the country’s socioeconomic fortunes. There are a couple of options for expanding the
country’s power generation capacity to meet current and future demand. These options
include installation of additional centralized energy systems, dominated by fossil fuels
(coal, oil, and natural gas); and/or deployment of the country’s renewable energy
resources in a centralized or decentralized system. This dissertation research envisions
that the latter option of renewables deployment would put the country on the path of
sustainable development, offering the country better environmental and
socioeconomic co-benefits.
The goal of this research, therefore, is in twofold. First, is to evaluate the
sustainability co-benefits of adding more renewable sources of electricity than
conventional sources to Ghana’s generation mix, and second, to offer policy
suggestions that can spur the country on towards such a large proportion of renewables
in the country’s electricity generation mix. Based on a scenario analysis approach, the
number of direct employment, the amount of consumptive water, and carbon dioxide
emissions associated with power generation are estimated and analyzed. The scenarios
for analysis consist of an unchecked BAU (business-as-usual situation - dominated by
fossil fuels), and two renewable energy dominated scenarios. The two renewable
xix
energy dominated scenarios are a sustainable energy deployment (SED) scenario and a
renewable energy revolution (REV) scenario. Employment estimates (excluding
energy efficiency jobs) indicate that the REV scenario would lead to 126,178 direct
jobs-years between 2015 and 2035. Direct jobs from the REV scenario is about 27%
(33,879) more compared to that from the BAU scenario (which is 92,299 jobs). The
SED scenario is estimated to create 91,595 direct jobs. Estimated total water
consumption associated with the REV scenario between 2015 and 2035 is 78 million
cubic meters. Consumptive water use related to the REV scenario is about 72% less of
the consumptive water related to the BAU situation (which has a consumptive water
use of 280 million cubic meters). The SED scenario is estimated to consume 145
million cubic meters of water. In terms of carbon dioxide (CO2) emissions, it is
estimated that the REV scenario would produce 48.50 Gg CO2 between 2015 and
2035. The estimated quantity of CO2 from the REV scenario is the lowest compared to
that from the SED and BAU scenarios of 177.29 Gg CO2 and 282.16 Gg CO2
respectively.
Also, estimated overall total costs (of capital cost, fixed operation and
maintenance cost, and fuel cost) for each of the scenarios shows that the BAU scenario
has a highest cost at the end of the year 2035 relative to the BAU and SED cases. This
is attributable to the fact that the BAU scenario indicates the highest capital as well as
fuel cost at the end of 2035. It is expected that the overall total cost of the REV and
the SED scenarios would relative continue to be less than that of the BAU beyond
xx
2035 as less total fuel cost would accrue from the REV and the SED scenarios relative
to the BAU case.
The results of the analysis indicate that a large proportion of distributed
renewable electricity generation in Ghana would offer more employment with more
expanded local value creation opportunities, reduced consumptive water use for power
generation, and also lead to a much more avoided CO2 emissions from the country’s
electric power sector. Towards a renewable energy deployment strategy that supports
the penetration of prosumers in Ghana, the study offers the following policy
recommendations; revamp the country’s energy policies of FIT and RPS into a hybrid
REFIT-RPS policy. Where the RPS component of the hybrid policy would establish,
the country’s overall comprehensive policy objectives and the FIT component would
serve as an implementation tool for realizing the RPS objectives. The study also
recommends setting a national renewable energy efficiency target as well as
promoting customer-owned small renewable energy systems.
This study recognizes that developing prosumer-owned renewables requires
the need for a shift away from the country’s conventional utility model. This shift is
necessary because the tenets of the traditional utility model conflict with a prosumer
based renewables deployment. Towards this shift, the study recommends establishing
a renewable energy and energy efficiency implementation entity in the country that
functions on the tenets of a “Sustainable Energy Utility.” The study further recognizes
that grid-connected renewable energy technological development that is suited for
urbanized communities is not sufficient for promoting access to an all-inclusive and
xxi
equitable sustainable development in Ghana. Off-grid solutions; including mini-grids
and standalone solutions that can be deployed briskly and with ease is a viable option
for rural communities in the country where grid extension is technically and
financially challenged.
1
Chapter 1
INTRODUCTION
1.1 Statement of Research
For decades, Ghana’s economy has been driven by abundant cheap
hydropower. However, as a result of expanding economic growth, urbanization, and
increasing industrial activities over the years, the country’s electricity demand has
rapidly increased. For about a decade now, the rapid electricity demand growth, as well
as sporadic hydrological shocks, and unreliable supply of natural gas for thermoelectric
power generation has led to power supply shortages. These power shortages have
resulted in the rationing of electrical energy, a situation that is adversely impacting the
country’s economy.
A long-term solution to Ghana’s power crisis is critical to the country’s socio-
economic development. Before now, renewable electric power generation efforts had
been on small scales; predominantly as a solution to challenges of rural electrification
and also as demonstration projects. However, due to recent global trends in renewable
energy deployment, developing countries in sub-Sahara Africa including Ghana are
now making efforts to increase the renewable portions in their power generation mix.
This new and increasing trend in renewables is towards energy security, environmental
sustainability, and other socio-economic co-benefits.
2
Among the well-established renewable energy technologies globally, there is
increasing deployment of solar PV and wind power as reflected in global trends. A
number of factors are responsible for driving this growing tendency. One of the factors
for this growing trend is the fact that renewable energy technologies, especially solar
PV has reached a tipping point in some parts of the world and reaching grid parity in
some regions. The need for low carbon options towards climate change mitigation and
fossil fuel pricing are some of the other factors.
Decisions to support the development and deployment of renewable energy
would benefit from detailed information on the co-benefits of renewable energy
technology and efficient renewable energy policies towards reaching such benefits.
Literature I reviewd on renewables deployment in sub-Sahaara African countires,
revealed that most studies are at a high aggregation in terms of geographical scope or
narrowly based on environmental assessments only. This study contributes to filling
this gap by providing a more holistic forward-looking quantitative and qualitative
analyses towards sustainable energy development. The research does this by evaluating
the benefits and cost implications of different energy pathways for Ghana into the
future. Policy suggestion are also offered towards the realization of such a futrue. The
study futher contributes to offering a recommendations towards enhnacing domestic
value creation from renewable energy systems; specifically in Ghana, of which can be
applied to other devleoping countries.
3
1.2 Research Questions
The general objective of this study, therefore, is to analyze the benefits of
deployment of renewables in Ghana and also to provide policy recommendations that
can spur the country on a path towards sustainable socioeconomic development. The
specific objectives therefore of this research are in two-fold:
to evaluate the sustainability co-benefits of an aggressive deployment target of
renewable electricity, and;
to put forward policy suggestions that can spur the development and
deployment of renewable electricity that supports domestic value creation in
Ghana.
In this regard, the specific research questions that this study seeks to address are as
follows;
1. What are the potential socioeconomic and environmental benefits of
renewable energy development in Ghana?
2. What are the potential socioeconomic benefits of energy efficiency
improvements in Ghana?
3. What policies can be used to promote a large proportion of renewables in
the electricity generaiton mix of Ghana?
The conceptual framework on which this study is based and the integrated research
approach deployed in investigating the above research questions are discussed in the
next section below.
4
1.3 Research Framework
The research framework designed for this study is based on the concept of
deploying policy instruments to overcome barriers to renewable energy deployment
towards achieving sustainable socioeconomic benefits/development. The key concepts
and theories that support and inform this research are:
a) The idea of sustainable development;
b) The relationship between sustainable development and renewable energy
deployment;
c) How the deployment of renewables enhances sustainable socioeconomic
development;
d) The concept and emergence of prosumerism in the electric power industry; and
e) The complex adaptive system (CAS) perspective of the emergence of
prosumers in conventional energy regime.
The framework for investigating the research questions of this study makes use
of both qualitative and quantitative analysis techniques. The quantitative analysis
makes use of scenarios analyses in evaluating benefits and costs (capital cost, fixed
operating and maintenance cost, and fuel cost) of deployment of energy pathways in
Ghana from 2015 to 2035. The qualitative analysis consists of renewable energy policy
review; including country renewable energy policy reviews.
5
1.3.1 The Concept of Sustainability
The term “sustainable development” gained prominence through the 1987
report by the World Commission on Environment and Development (WECD), Our
Common Future - a report popularly referred to as the Brundtland Report. The
Brundtland Report defined “Sustainable development as “development that meets the
needs of the present without compromising the ability of future generations to meet
their needs” (WCED, 1987).
The United Nations “Conference on Environment and Development"
(UNCED), informally known as the Earth Summit played a major role in promoting
the concept of sustainable development. Notable outcomes on sustainable development
through the UNCED include the Rio Declaration1, Agenda 212 and the Johannesburg
Plan of Implementation.3 One key idea the UNCED had over the years tried to
propagate is the concept that “sustainable development should be an adaptive learning
process that is implemented coherently within a multilevel institutional structure”
(UNDESA, 2012 pp. 5). The United Nations Department of Economic and Social
1 The Rio Declaration (the Rio Declaration on Environment and Development), was a
short document produced at the 1992 United Nations "Conference on Environment and
Development" (UNCED), informally known as the Earth Summit.
2 Agenda 21 was a non-binding voluntary action plan from the UNCED in Rio de
Janeiro, Brazil in 1992.
3 The Johannesburg Plan of Implementation was agreed upon at the Earth Summit in
Johannesburg, South Africa in 2002. The Earth Summit in 2002 built upon earlier
declarations, including that of Rio de Janeiro in 1992.
6
Affairs (UNDESA, 2012) noted that, the concept of “institutions for sustainable
development” is broader than that of institutions dedicated to sustainable development.
The UNDESA noted that the concept of “institutions for sustainable development”
involves National Sustainable Development Strategies (NSDSs)4 that seek to integrate
the economic, social, and environmental dimensions of sustainability at the very
beginning of the management cycle or at the strategic planning phase of development
projects (UNDESA, 2012). Table 1.1 below compares a set of guiding principles for
NSDSs as put forward by the UNDESA and the Development Assistant Committee
(DAC) of the Organization of Economic Co-operation and Development (OECD)5.
Comparing the NSDSs principles of the UN and that of the OECD, George &
Kirkpatrick (2006) pointed out that though the essence of the principles from the two
organizations are similar, the UNDESA principles were developed to fit all countries,
whilst, that of the DAC of OECD were meant mainly for developed countries.
4 The UNDESA defined National Sustainable Development Strategy as a coordinated,
participatory, and iterative process of thoughts and actions to achieve economic,
environmental and social objectives in a balanced and integrative manner (UNDESA,
2002).
5 The OECD Development Assistance Committee (DAC) became part of the OECD by
Ministerial Resolution on 23 July 1961. It is an international forum of many of the
largest funders of aid, including 29 DAC Members. The World Bank, IMF and UNDP
participate as observers. The mandate of the DAC of OECD is to promote development
co-operation and other policies so as to contribute to sustainable development,
including pro-poor economic growth, poverty reduction, improvement of living
standards in developing countries, and a future in which no country will depend on aid.
7
Table 1.1: National Sustainable Development Strategy (NSDS) Principles.
Core Principles OECD Principles UN Principles
A. Integration of
economic, social
and
environmental
objectives.
Comprehensive and
integrated. People-centered.
Integration and balanced across
sectors and territories.
B. Participation
and consensus.
Consensus on long-term
vision. Effective
participation.
Shared strategic and pragmatic
vision. Link the short to the medium
and long terms. Ensure continuity of
the strategic development process.
Participatory and the widest possible
participation ensured.
C. Country
ownership and
commitment.
Country led and nationally
owned. High-level
government commitment
and influential lead
institutions.
Nationally owned and country-
driven process. Strong political
commitment at the national levels.
Spearheaded by a strong institution.
D. Comprehensive
and coordinated
policy process.
Based on comprehensive and
reliable analysis. Building
on existing processes and
strategies. Link national and
local levels.
Anchor the strategy process in sound
technical analyses. Build on existing
processes and strategies. Link
national and local priorities and
actions.
E. Targeting,
resourcing, and
monitoring.
Targeted with clear
budgetary priorities.
Incorporate monitoring,
learning, and improvements.
Develop and build on
existing capacity.
Set realistic but flexible targets.
Coherence between budget and
strategy priorities. Build mechanisms
for monitoring follow-up, evaluation,
and feedback.
Source: George and Kirkpatrick (2006)
There are many facets or dimensions and views to sustainability. Also, theories
on sustainability tend to prioritize and integrate these different aspects and opinions.
However, there are two major views on the concept of sustainability that underpin this
study. One is the view that sustainability is the maintenance of the stock of capital -
whether natural, man-made or socio-culture. The other is the triangular view that
suggests the integration of the economic, social and environmental dimensions of
8
sustainability within the framework of an adaptive learning process (UNDESA, 2002:
2012).
The focus of varying views on sustainability in terms of maintenance of stock
of capital hinges on the substitutability between “natural capital” and
“manufactured/man-made capital.” These two ideas on sustainability based on
maintenance of stock are usually categorized as“strong” and “weak” sustainability
(Pearce et al. 1994) (Ayres et al. 1998) (Hediger, 2006). From the neoclassical
economic theory of growth and capital accumulation comes the concept of the weak
sustainability view. This theory of weak sustainability expands to include non-
renewable resources and allows for unlimited substitution between man-made and
natural capital in the sense that only the aggregate stock of capital needs to be
conserved. Therefore, in its application to energy resources, proponents of the concept
of weak sustainability contend that non-renewable resources such as fossil fuels are
substitutable by renewable energy resources. They also assert that environmental
degradation is compensatable for with man-made capital (Neumayer, 2003) (Solow,
1974) (Hartwick, 1977). On the contrary, the view of strong sustainability is founded
on the thermodynamic foundation of a steady-state economy (Daly, 1972) (Daly,
1974). Therefore, the concept of strong sustainability views sustainability as “non-
diminishing” and achievable through conservation of the stock of human capital,
technological, natural resources and environmental quality (Brekke 1997). The view of
the promotion of economic progress within the limits of “non-degradation” of
9
ecological and environmental stock is the focus of the concept of strong sustainability,
and it is argued that this supports social equity.
The “triangular view” of sustainability is the most common approach to the
conceptualization of sustainability. At its core is the interconnection of the “three
pillars” – a view of sustainability that asserts consideration of the three dimensions - of
the economic, social and environmental dimensions of sustainability altogether. The
interconnectedness of the three pillars of sustainability as ealier indicated, has been
asserted by the UNCED and also by many authors, in various ways and forms.
Common & Perrings (1992) suggested that to avoid narrowly focusing on economic
efficiency, the view of sustainability should be integrated with an ecological dimension
of sustainability. Haris (2003) asserted that economic viability requires the
maintenance of both natural and human capital. The basis of Harris’s (2003) argument
is that the maintenance of capital stock requires the conservation of ecosystems and
natural resources. The suggestions by Harris (2003) imply the need for a reduction in
pollution, and the minimization of exploitation of natural resources, as well as the
maintenance of resilience, integrity and stability in ecosystems. The intertwined nature
of environmental sustainability and social sustainability is suggested amongst others,
including Lipton (1997) and Scherr (1997). Writings on the relationship between
environmental and social sustainability emphasize the relationship between poverty
and inequity. These writings assert that increased poverty, loss of livelihoods and
environmental degradation are reciprocal.
10
Given that the use of energy underlies all economic activities, this study
believes that the deployment of affordable, clean energy can sustain development and
alleviate poverty. This study is also of the view that the diversification of energy
supply to include renewable, low-carbon energy sources suitable for sustainable
socioeconomic development can lead to an increase in per capital income and result in
improvement in standards of living and social equity.
1.3.2 Renewable Energy and Sustainability
Increasing economic growth in recent years especially in developing countries
based on the conventional energy system of fossil fuels pose local and global
sustainability challenges particularly to climate change and depletion of fossil fuels. A
transition to alternative and sustainable power generation pathways is one of the surest
paths towards global sustainability. Compared to fossil fuels that require the
exploitation of the earth’s environment, renewable energy technologies harness and
make use of different natural energy resources available from the earth’s environment
without necessarily exploiting the environment (Newman, 2003). Renewable energy
technologies thus depend on natural resources that are “renewable” – capable of being
replaced by natural ecological cycles and sound management practices. Compared to
non-renewable energy sources such as fossil fuels, renewable energy resources are
replenishable in the relatively near future (Neumayer, 2003). Also, comparatively, the
use of renewable energy resources leave an ecosystem approximately the same as
before the process of energy exploitation started. These characteristics of renewable
energy technologies are some of the attributes that qualify renewables as having a high
11
correlation with the concept of strong sustainability. Also, renewable energy sustains
natural capital due to its potential for future harvest, and this re-enforces the paradigm
of strong sustainability.
Renewable energy technologies and energy efficiency improvements go hand
in hand; they create a virtuous circle as each sustainably enhances the other, and both
support sustainable development (IRENA, 2014b). Energy efficiency improvements
can be achieved in ways that include;
1) technical efficiency (energy productivity) – i.e. when there is a reduction in
physical energy input for a given energy services,
2) reduction in energy intensity – i.e. when there is an improvement in energy
savings per output at the economic or sectoral level,
3) energy conservation, which mainly involves a reduction in absolute demand for
energy, and
4) demand response programs, including shifting demand to improve system
efficiency.
A report by the International Renewable Energy Agency (IRENA) indicates that
without any change in global energy efficiency improvements globally, the share of
renewables in the total energy use would be 20% by 2030. However, if the rate of
global energy efficiency doubles, renewable energy could reach 40% share by 2030
(IRENA). This is because, with greater energy efficiency, the total demand for energy
would be reduced causing the same amount of renewable energy to cover a larger share
of demand.
12
Fossil fuel power plants experience significant energy loss in the conversion
from primary fuel to final electric energy. However, this is not the case with many
renewables such as hydropower, solar and wind, power generation (except for
biopower that depends on burning primary biofuels). Given that these renewable
sources do not depend on burning fuels, it can be comparatively assumed that these
renewables take place with 100% efficiency and, therefore, renewables yield high-
efficiency gains (IRENA, 2014b). Further to providing energy security, renewable
energy and energy efficiency also contribute to the developmental goals of the “three-
pillar” model of sustainability – thus, integrating the economic, social and
environmental dimensions of sustainability.
An E4 (Energy, Economic, Environment, and Equity) sustainability framework
by Wang et al., (2009:2012) suggests integrating four dimensions of sustainability.
Namely, energy security, economic, and environmental sustainability and equity
dimensions. Comparatively, the E4 framework of sustainability is an extension of the
“three-pillar” concept of sustainability. The E4 framework has a strong inclination
towards the “strong” view of sustainability. This study’s exposition on the E4
framework, as it pertains to sustainability benefits of renewable energy, are discussed
below.
Environment: Deployment of renewable energy technologies that are cleaner,
and improvements in energy efficiency is important for developing countries in their
pursuit of low-carbon development based on green growth. The generation of power
13
based on non-combustible renewable energy resources have relatively lower or no
water footprint, less impact on biodiversity and the atmosphere. This is because no
water or very minimum water is required compared to thermoelectric power generation
where lots of water is used in the production of primary fuels and thermoelectric
cooling. Renewable sources of electricity and energy efficiency lead to a relatively low
local pollution (of land, water, and air). Relative to fossil energy resources such as
coal, oil and natural gas, renewables such as solar and wind depend less on the
exploitation of natural resources and this better promotes the integrity and stability of
ecosystems.
Energy Security: Availability, resilience, affordability and sustainability of
energy are interconnected components of energy security. Unlike renewable energy
resources which can be replenished within the lifetime of most average humans, all
fossil fuels are finite resources. For instance, it has been asserted that from 2000 to
2005, the world’s proven reserves-to production ratio of coal allegedly plummeted by
over 40%, from 277 to 155 years (Kavalov, 2007). Scott (2011) noted that the
resilience of fossil fuels in terms of portability and storability has come into question in
recent decades as the extraction, transportation, and storage of oil can create disastrous
environmental and social burdens. Examples of these disasters include high profile oil
spills such as the Deepwater Horizon disaster in the Gulf of Mexico in 2010 and the
Exxon Valdex accident in Alaska in 1989.
Increasing renewable energy technologies improves energy diversity by
providing more distributed (decentralized) and modular power supply that is less prone
14
to interferences. A massive deployment of renewable energy technologies that utilizes
a significant amount of domestic resources would mean less dependence on imported
fossil fuels. This for many developing countries in Africa including Ghana would
translate into a reduction in import bills and improvement in the country’s balance of
payments. These factors inadvertently make a compelling case for renewable and
sustainable energy options towards energy security.
Economic benefits of renewable energy deployment and energy efficiency
improvements include jobs creation, improvement in local skills and creation of
income-generating activities. Upstream supply chain activities such as production and
supply of components of renewable energy technology and related downstream
activities such as operation and maintenance promote domestic and regional economies
(IRENA, 2013). In its 2008 Green Jobs report, the United Nations Environment
Program (UNEP) concluded that compared to fossil-fuel power plants, renewable
energy generates more jobs per unit of installed capacity, per unit of power produced
and per dollar invested (UNEP, 2008). The UNEP’s estimates based on 2006 data
indicates that the global number of jobs in the RE sector was at least 2.3 million.
Newer estimates by REN21 (2011) have further raised this figure to 3.5 million.
Broken down by subsector, the REN21 estimates are; 630 000 workers in wind power,
350 000 in solar PV and more than 1.5 million in biofuels. In Germany, a similar
analysis shows that the renewables sector of that country employs about 360,000
people (BMU, 2011). The extent of benefits of jobs creation, income and total
economic output that accrue from renewable energy development and deployment
15
depends on the degree to which economic, social and environmental value is created
locally. (Goldberg, Sinclair, & Milligan, 2004).
Equity (Social): Issues on distributional equity, provision of social services,
gender equity, population stabilization, and political accountability and participation
are some of what bother on social sustainability (Reed, 1996). Renewable energy
enhances social equity in a number of ways. A localized and distributed renewable
energy technology offers opportunity for participatory democracy in individual and
community energy decision-making and this is an essential element for equitable
development. Compared to conventional energy forms, renewable energy technology
allows us to build a resilient, and sustainable future that meets the needs of this
generation and that of the next (Renewable Energy Ventures, 2013). Distributed
renewable energy technologies especially for residential and commercial use offer
inclusion especially through the distribution of economic benefits such as new jobs
(through community enterprises) and income generation. Another critical avenue for
social equity is the opportunity renewables offer for securing the voices of low-income
communities in the design, development and implementation of energy projects (Buell
& Mayne, 2011). Renewable energy technologies also require less or no water use and
do not pollute air and water sources compared to conventional energy production and
power generation.
A sustainable energy future promises economic improvement especially in
developing countries in Africa through access to modern energy services, protection of
the environment and provision of reliable power supplies. Large proportions of
16
renewable energy deployment coupled with energy efficiency improvements are
important for “green growth6”. This is because high proportions of renewables offer a
resilient, low-carbon, resource efficient, and socially inclusive approach to
development, which is different from the developmental path of “grow first, and clean
up later” trajectory.
1.3.3 The Concept of Renewable Energy Prosumers
Originating from the 1980s and brought into mainstream use by the information
technology and digital business industries, the term “prosumers” has been used to
characterize users who have created their own online products, ranging from open
source operating systems such as Linux to informational resources such as Wikipedia
(IEA-RETD, 2014).
“Prosumer” as an emerging concept in the electric power market applies to a
consumer who also doubles as a producer of power7. This means that at some points in
6 Green growth is defined variously as: “economic progress that factors environmental
sustainable, low-carbon and socially inclusive development” (UNEP); “A new model
of economic growth that simultaneously targets key aspects of economic performance,
such as poverty reduction, job creation and social inclusion, and those environmental
sustainability, such as mitigation of climate change and biodiversity loss and security
of access to clean energy and water” (Global Green Growth Institute); “Job creation or
GDP growth compatible or driven by actions to reduce greenhouse gasses” (Green
Growth Leaders); and “fostering economic growth and development while ensuring
that natural assets continue to provide the ecosystem services on which our well-being
relies” (OECD).
7 Some authors suggest a broader definition of electricity prosumers to include
elements such as the ability to react to dynamic pricing, the use of demand response,
and integration with smart grid infrastructure (Shandurkova, et al., 2012) (Kok, 2009).
17
time prosumers feed power into the grid and at other times they take power from the
grid (Klose et al., 2010). A prosumer could be a household, an office, an industrial
entity or similar who puts power in the grid and also takes energy from it. According to
Shandurkova, et al. (2012), the concept of prosumer is not a mere user-centric focus on
self-sustainability as it cannot be limited to the notion of a consumer who also
produces but is not affected by the state of the market. Rather, prosumers are market
participants who are expected to take on more active roles in the market, directly or
indirectly.
Conventionally, power systems that are not very large have been categorized
distinctively as small producers or small consumers of electricity. However, current
technological advancements and developments in distributed renewable energy
sources, demand flexibility, and energy storage has allowed even smaller consumers to
be able to produce and even store energy. Shandurkova et al. (2012) observed that the
new emerging entity - a “prosumer”- in the power sector is an economically motivated
entity that:
Consumes, produces, and in some cases stores electricity and energy in general;
Optimizes the economic and to some extent the technological, environmental
decisions regarding energy utilization; and
Becomes actively involved in the value creating effort of an electricity or
energy service of some kind.
18
In expounding on the concept of prosumerism, Shandurkova, et al. (2012) and (Kok, et
al. 2008) pointed out that, a group of prosumers could be put together under one
umbrella – and be organized and managed in the form of a Virtual Power Plant8 (VPP).
The evolution of power markets - accelerating on the path of more distributed
energy, especially, of renewable energy sources, has brought about some complexity in
managing the two-way nature of prosumerism. A research by Navigant noted that one
of the ways of managing the two-way complexity of being a consumer and a producer
is the strategy of virtual power plants (VPP) and this can be viewed as a manifestation
of the concept of transactive energy9 (Navigant Research, 2014). So that technically, a
VPP in a geographical area could transact with the power market and/or with the grid
in the best mutual interest of the group of prosumers that constitute the VPP within that
geographic scope.
As renewable energy costs continue to decline, industrial energy prosumerism10
can serve as an integral strategy for industries to overcome their electric power supply
8A Virtual Power Plant (VPP) is a system of integrated power sources. Kok (2009)
noted that a VPP is a flexible representation of a portfolio of distributed energy
resources i.e. distributed generation, demand response and electricity storage. Often a
VPP of clustered distributed generation systems are orchestrated by a central authority.
9 Transactive Energy (TE) is defined as “the set of economic and control mechanisms
that allows the dynamic balance of supply and demand across the entire electrical
infrastructure using value as a key operational parameter.” (GridWise Architecture
Council).
10 An industrial prosumer of renewable energy is defined by UNIDO as “an industry
that produces and makes use of renewable energy sources such as solar, wind,
bioenergy, etc. to supply a portion or all of its onsite energy needs. In many cases, this
19
challenges especially in developing countries in Africa where electric power shortages
are having adverse impact on industries and businesses. Regarding the role of
industrial prosumers in supporting rural electricity provision, the United Nations
Industrial Development Organization noted that: “industrial prosumers is not limited to
systems that are connected to a grid…..in some cases, there is the potential for certain
industrial operations to supply power directly to rural customers, or even be
incentivized to invest in mini-grid infrastructure themselves, turning formerly
independent industrial prosumers into rural electrification providers. Such
arrangements could help support existing government efforts to increase rural
electrification in off-grid and remote regions, and further accelerate the development of
sustainable energy in the developing world” (UNIDO, 2015. Pp 15).
The benefits of industrial prosumerism include the following (UNIDO, 2015):
Turning energy into a business opportunity rather than merely a cost factor for
businesses;
Ensuring the availability of a stable energy supply, especially electricity to
ensure productivity;
Making use of existing waste streams (such as in agricultural operations);
Adding energy as a new income stream to the enterprise;
Increasing production efficiency and reliability (reducing down time);
includes selling excess energy or electricity to the national/local grid or to the
surrounding community” (UNIDO, 2015. Pp 14).
20
Increasing price competitiveness of renewable energy technologies;
Reducing production cost, emissions and pollution (i.e. effluents);
Promoting local development, particularly in rural areas by selling excess
energy to the local community;
Advancing Corporate Social Responsibility (CSR);
Creating local jobs;
Increasing enterprise competitiveness by reducing power supply uncertainties
and or supply and volatility of fuel costs.
The emergence of solar photovoltaic (PV) as one of the fastest growing onsite
generation technologies gives the emergence of PV prosumers11 the potential to
fundamentally alter the established conventional electricity system (IEA-RETD, 2014).
Herman Scheer asserted to this when he pointed out that;
“[S]ince everybody can actively take part, even on an individual basis, a solar
strategy is ‘open’ in terms of public involvement… It will become possible to
undermine the traditional energy system with highly efficient small-technology
systems, and to launch a rebellion with thousands of individual steps that will
evolve into a revolution of millions of individual steps.”
Hermann Scheer, A Solar Manifesto (2005).
11 PV prosumers can be defined as single family homes, multifamily residential homes,
offices as well as buildings in the commercial and industrial sectors that generate a
portion or all their electricity needs from solar PV (IEA-RETD 2014).
21
According to IEA-RETD (2014), the trends, drivers, and interests that are
shaping the emergence of PV prosumers are complex and these vary from country to
country. These drivers include economic, behavioral, and technological factors as well
as underlying national conditions. An evolution of PV prosumers into a PV
revolution12 would be much disruptive because it will transform many of the power
industry’s common beliefs. It would also pose many risks was well as create many
more opportunities for business; including business model innovations in the power
sector.
1.3.4 Emergence of Prosumerism: A Complex Adaptive System Perspective
The emergence of prosumerism is accompanied by codependent technical
component requirements in the power sector. It also brings with it shifts in the
interactions between stakeholders. With this involving market players in the power
market having to constantly and flexibly change in relation to their local context.
Veitas et al. (2015) noted that such self-organizing network of interacting agents is
typical of complex adaptive systems (CASs).
Klose et al. (2010) pointed out that the complexity associated with the
emergence of renewable prosumers brings about disruptive changes in the power
industry, which potentially moves the market towards a more decentralized
12 “A prosumer “revolution” under which decentralized adoption of PV occurs in the
absence of supportive policy or regulatory conditions has not yet arrived. Self-
consumption of solar PV is a growing trend globally, but its mass expansion remains
within policy makers’ ability to control.” (IEA-RETD, 2014).
22
architecture. The emergence of electric power prosumers has significant implications
for all players in the power industry, from utilities, gas companies, and technology
providers to transmission system operators and distribution system operators (Klose et
al., 2010). Klose, et al. (2010) noted further that with prosumer emergence, the power
sector will require the introduction of energy storage systems, as well as smart grids
that facilitate demand side management and the management of peaks of supply.
Agbemabiese (2009) noted that in such situations of complexity, emerging sustainable
energy systems are driven by civil societies, and individuals who become active
participants, shaping the evolving and emerging energy system in a direction towards
sustainability, without recourse to the conventional model of energy system where
there is a hierarchical structure and top-down management.
This study observes that complex adaptive systems principles and perspectives
as expounded by Agbemabiese (2009) and others are in line with the E4 (Energy,
Economic, Environment, and Equity) dimensions of sustainability. These CAS
principles include the following:
CAS perspective allows for meaningful exploration of sustainable energy and
development trajectories. These emerging trajectories reposition local
participants and local interactions, through guided openness to experimentation,
and the freedom of learning from mistakes. This perspective of CAS supports
energy independence and energy security. It also offers opportunities for
distributional equity, provision of social services, gender equity, and inclusive
participation.
23
CAS also shuns rigidity and rejects “inhibitors of diversity” including global
institutional and political systems that insist on conventional approaches.
CAS strongly couples economic development with human development. It
considers capacity building crucial towards empowering civil societies to
participate actively in their economic emancipation and eradication of diseases
and other social challenges.
Alluding to an assertion by Rihani (2003), Agbemabiese (2009) pointed out
that CAS embraces the creation of a regime of rules and institutions. It also
encourages willing compliance from the majority to govern the complexities of
evolving patterns and phases to ensure the survival, stability and sustainability
of the system.
Regarding the application of CAS thinking to deployment of energy at the level
of rural communities (especially in poor and developing countries), Agbemabiese
(2009) noted that: “CAS thinking abandons the traditional belief that once energy is
infused into a rural economy, it is only a matter of time before social concerns - such
as reaching the poorest of the poor - fall into place” (Agbemabiese, 2009. Pp 154). He
further noted that, in contrast, “an energy-planning process informed by a CAS
paradigm would first identify the basic energy services by which the poor may be
enabled to develop and pursue sustainable livelihood strategies” (Agbemabiese, 2009.
Pp 154). Accordingly, what this means for renewables deployment in rural
communities within the context of complex adaptive system management is that:
24
The energy needs of the people should be assessed within the overall context
of continuous interactions involving political-economic, technological, and
environmental systems as well as individual actors;
Instead of promoting particular technologies for rural energy service delivery
through detailed planning, decision makers should operate on the idea that the
energy service needs of different rural communities vary widely;
Effort should be made to find appropriate technologies and effective
implementation strategies that are context-specific;
Energy strategies should be developed in a holistic way with each specific
project designed, implemented, and evaluated in parallel with other
development interventions relating to the human and ecosystem health,
education, agriculture, and other sustainability needs of rural communities.
1.3.5 Research Design
There are barriers to realizing renewable energy benefits such as energy
security, social (equity), and economic and environmental sustainability in many
developing countries in Africa including Ghana. The design of this study (as illustrated
in Figure 1.1) therefore includes an analyses of potential benefits of renewable energy
deployment in Ghana using scenario analysis which is followed by a review of the
barriers to renewable energy deployment in the country.
25
Figure 1.1: Research Design for Analyzing Sustainable Socioeconomic Benefits of
Renewable Energy Deployment.
Through multiple African country case studies and review of existing renewable
policies and practices, the research offers policy suggestions toward increasing the
proportion of renewables in the generation mix of the country.
Socioeconomic and environmental benefits quantitatively measured in the
scenario analysis are; 1) job creation, 2) electric power related water savings, and 3)
emissions reductions. These benefits are chosen for quantification for three main
reasons - they are relevant to the socio-economic needs of a developing country like
26
Ghana, data availability towards estimation and also, estimations of these benefits are
within reasonable and appropriate assumptions13. Jobs creation is analyzed instead of
gross domestic product (GDP) and income due to ease and appropriateness of measure
of measuring employment. Also, employment is more indicative of income and
people’s economic well-being than the total economic output of a nation (GDP). This
is because, a lot of the wealth created could be controlled by a few of those at the top
higher bracket of the economy, implying that “good” for economy does not necessary
mean “good” for all the people. Emissions reduction is the environmental benefit
measured because, Ghana’s future generation plans envisage increasing the use of
fossil fuels to meet the country’s needs for electricity capacity expansion. The
country’s fossilized power generation plans include coal power generation, and these
are expected to significant increase the country’s environmental footprint in terms of
air and water pollutions. Therefore, the importance of improving the environmental
performance of an energy pathway into the future through emissions reductions is
crucial for sustainable socioeconomic development. Energy-related consumptive water
savings is an important measurement for sustainable socioeconomic development. This
is due to increase water stress as a result of global climate change and the fact that
water plays a vital role in conventional energy infrastructure. Further more, water plays
13 The ease as well as the reasonableness of estimates based on appropriate
assumptions is linked to the availability of data and the analytical method or model
being used.
27
an essential role in the extraction, purification, washing and treatment of primary fuels
such as coal and natural gas (used in electrcity generation). Also, water is used as a
coolant in thermal power plants, and it is the “fuel” for hydropower plants.
The design for analyzing sustainability benefits of energy pathways, in this
study applies a futurological approach of scenario analysis. Kosow and Gaßner (2008)
noted that a conceptual future is merely a hypothetical future state of affairs, whiles a
scenario describes the developments, the dynamics, and the driving forces that lead to a
particular conceptual future. In line with the definition of a scenario by Kosow and
Gaßner (2008) this study’s construct of a scenario consist of a description of a future
possible energy development pathway, including policies and strategies that can lead to
such a pathway.
The construction of scenarios, is underpinned by three main views (Kosow &
Gaßner, 2008): 1) “the future is predictable”- in that whatever will come to pass in the
future can at least in principle be calculated from our understanding of the past and the
present; 2) “the future is evolutive”- in that our current knowledge is inadequate for
predicting future developments as the path of the future is uncontrolled, random and
chaotic; and 3) “the future is malleable” - in that the development of the future is open
to planned management or manipulation and can be influenced in part by our actions.
Kosow and Gaßner (2008) noted that, the third view emphasizes and allows for
strategies for interventions towards shaping the future of predetermined goals through
a decision-making process. The use of scenarios for analysis in this study is
underpinned by the three main views above. A summary of the quantitative methods
28
used in estimating benefits of renewable energy deployment in the study are presented
in the next section below.
1.4 Summary of Methodology
The methodology deployed in the quantitative analyses of this study is based on
a scenario analysis. Three scenarios are constructed for analysis, namely:
1. A business as usual (BAU) scenario that assumes dominance of fossil source
electricity capacity additions;
2. A sustainable energy deployment (SED) scenario which is assumed to be
renewable energy policy driven, and;
3. A renewable energy revolution (REV) scenario which assumes a much more
renewables-based capacity addition to the generation mix.
Power generation capacity additions are projected for each of the above three energy
deployment pathways or scenarios for the period 2015 to 2025 and for the period 2025
to 2035. Details on the construction of the above scenarios are in Section 4.1 of this
study. Direct jobs/employment estimates, carbon dioxide emissions and consumptive
water use associated with electricity production are estimated and analyzed based on
these three scenarios.
1.4.1 Method of Estimating Jobs Creation
Jobs impact assessment studies of renewable energy are classified by
Breitschopf et al. (2011) into two broad categories. These two categories are gross
employment studies, and net employment studies (as shown in Figure 1.2 below).
Within the scope of Breitschopf et al.’s classification, this study uses a gross impact
29
assessment approach to analyzing the positive effects of direct employment through
scenario analysis (not including indirect and induced jobs).
Figure 1.2: Quantitative Impact Assessment Methods (Gross and Net Studies)
Direct employment estimates are calculated for direct jobs in manufacturing,
construction (and installations), and also in operations and maintenance. The
employment analysis approach applied to this research is similar to that used by
Rutovitz and Atherton (2008; 2010; 2012) in analyzing the employment effects of the
2008, 2010 and 2012 Global Energy [R]evolution scenarios published by the
Greenpeace International and the European Energy Council (Rutovitz and Atherton,
2009), (Rutovitz and Usher, 2010), (Rutovitz and Harris, 2012). Inputs to the
employment modeling in this study include the following:
Impact Assessment Studies
Research Focus Impacts on Employment
Number of jobs in the RE
Industry
Number of jobs in the
Total Economy
Positive Effects Positive and
Negative Effects
Gross Studies Net Studies
30
Data on “employment factors” i.e. the jobs per unit of electricity capacity or
energy14 for each electricity generating technology (see Appendix A for
employment factors used);
Regional job multipliers for Africa15 (see Appendix B); are applied to modify
the employment factors (in Appendix A) to reflect the African regional
situation;
A “decline factor” for each technology is applied to the adjusted employment
rates to account for maturity and efficiency of technologies and production that
occur over the projected period of the scenarios (the learning rates assumed are
listed in Appendix C);
Constructed future energy pathways /scenarios; Business-As-Usual (BAU),
Sustainable Energy Deployment (SED) and Renewable Energy Revolution
(REV) scenarios for Ghana. The projected installed capacity (in MW) by
technology and corresponding fuel supplies (in primary fuel units).
14 Operations and Maintenance (O&M) and fuel supply employment factors are
expressed in terms of jobs per MW and per GWh respectively, and are ongoing jobs.
Construction, manufacturing and installation (CMI) employment factors are expressed
in terms of jobs years per MW installed (see Appendix A).
15 As there are currently no local employment factors for determining energy sector
jobs for Ghana, this study follows the approach of Rutovitz and Harris (2012) and
Rutovitz (2010) by using regionally adjusted OECD employment factors.
31
Percentage local manufacturing - these are used to estimate the effect of the
proportion of local manufacturing on the creation of jobs associated with
manufacturing of components of solar PV in Ghana.
Energy efficiency related employment is also calculated for each of the three
scenarios. Direct jobs created in each deployment scenario is calculated by
multiplying the electrical capacity addition (of the different technologies in the
generation mix) in each scenario by the employment factors for each of the
technologies. Labor intensity16 is adjusted for using regional multipliers for the African
region for each of the OECD employment factors for each technology. Summary of
the calculation of direct energy jobs in illustrated in Appendix D.
1.4.2 Method of Estimating Water Savings
The approach to estimating consumptive water use17 associated with electric
power generation is based on a method used in estimating water savings in energy
(input fuels and electricity) production by Wang et al. (2015). This approach estimates
the consumptive water use for electricity in two steps: 1) estimation of the consumptive
16 Usually, the lower the cost of labor in a country the greater the number of workers
expected to be employed per unit of any particular output. This is because when the
cost of labor is low, it is relatively less expensive to employ labor compared relative to
mechanized means of production (Rutovitz & Harris 2012).
17 Consumptive water use is water removed from available supplies without return to
the water resource system from which the water was withdrawn. It therefore refers to
the amount of water that is evaporated, transpired, or incorporated into products or
crops, or otherwise removed from the immediate water environment.
32
water associated with input fuels for power generation; and 2) estimation of
consumptive water related to the actual generation of electricity where water is used
for cooling18. The estimated total water for electric power generation is therefore the
summation of estimated consumptive water use for production of input fuels (coal,
natural gas, and oil) and that for cooling in the power generation process19. This is
represented by the equation below.
[ 𝐸𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑
𝑇𝑜𝑡𝑎𝑙 𝑊𝑎𝑡𝑒𝑟 𝑓𝑜𝑟 𝐸𝑙𝑒𝑐𝑡𝑟𝑖𝑐𝑖𝑡𝑦
] = ∑ [ 𝐶𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑣𝑒 𝑊𝑎𝑡𝑒𝑟 𝑈𝑠𝑒
𝑓𝑜𝑟 𝑖𝑛𝑝𝑢𝑡 𝑓𝑢𝑒𝑙𝑠 𝑃𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑜𝑛 ] + ∑ [
𝐶𝑜𝑛𝑠𝑢𝑝𝑡𝑖𝑣𝑒 𝑊𝑎𝑡𝑒𝑟 𝑈𝑠𝑒 𝑖𝑛 𝑇ℎ𝑒𝑟𝑚𝑜𝑒𝑙𝑒𝑐𝑡𝑟𝑖𝑐 𝐶𝑜𝑜𝑙𝑖𝑛𝑔
]
This analytical approach to estimating total water associated with electricity was
deployed in estimating the water use for power generation in each of the scenarios in
this study.
The estimation of consumptive water relating to input fuels for electricity
generation is based on water consumption factors reported by the World Energy
Council (2010) (see Appendix E). These water consumption factors for input fuel
production is the embedded water in the primary input fuels (coal, and natural gas).
18 Typically in a thermoelectric power plant, heat is removed from the cycle with a
condenser and cooling water is used in doing this.
19 Consumption water associated with electric power generation occurs at different
stages along the electricity value chain (Perrone et al. 2011). These include water for
mining, extraction and refining, water for production of fuels required for the
transportation of coal and other fossils, water for electricity generation and water for
electricity loss due to transmission. However, due to data constraints, this study
estimated water consumption associated with electric power from mining, extraction
and refining and water for cooling in thermoelectric plants.
33
The embedded water is the water required for mining, extraction, and refining of the
primary input fuel for electricity generation. The consumptive water factors for
primary fuels therefore include the water necessary for mining, extraction, and refining
of primary input fuels. Though water is associated with transportation of coal and other
fossils, this is not analyzed in this study due to data constraints. There may be some
variability in the embedded water for production of input fuels for different locations,
however, due to data constraints this study uses single water factors from the World
Energy Council (2010).
To estimated the consumptive water associoated with primary fuel produciton,
the megawatt-hour (MWhr) of electricity is first calculated; from the installed capacity
(MW) in each scenario taking into considertion the capacity factor of the generating
technologies in each scenario. The megawatt-hour of electricity per generation
technology is multiplied by the consumptive water factors for the primary fuel of the
generating technology. The consumptive water factors for input fuels (from Wang et
al., 2015) used in this study are shown in Appendix F. Similarly, the consumptive
water associated with thermoelectric cooling is estimated by multiplying the average
water consumption factors (water use/kWh) for the various sources of generation in
each of the scenarios by the calculated electricity-produced in each secanrio.
1.4.3 Method of Estimating CO2 Emissions
Carbon dioxide (CO2) emissions from electric power generation are primarily
dependent on the carbon content of the primary fuel for combustion in power plants.
The method of estimation of CO2 emissions associated with each of the three scenarios
34
is a simple approach what takes advantage of this fact. Carbon dioxide emissions
estimates20 are based on electricity (in kilowatt-hours) projected for fossilized sources
of power in each of the scenarios. The steps involved in the calculation are listed
below.
1. Fossilized added capacity (in MW) in each scenario is converted to kWhr.
2. The quantity of input fossil fuel is determined. This is done by dividing the
projected electrical energy generation (in kWhr) by the ideal energy content (in
kWhr/kg) of the various electricity generation input fuels and also by their
power plant thermal to electricity efficiencies to obtain the quantity (in units of
physical quantity) of fuel required to generate the electrical energy. (The
energy content (in kWhr/kg) and other related parameters on the various
primary generating fuels used in the estimation are listed in Appendix G.)
3. Using the quantity of input fossil fuel calculated in step 2 and the percent
carbon by weight data (in Appendix G), the weight of carbon in the quantity of
the fossil fuel is determined.
4. Given that the combustion (oxidation) of carbon releases energy and produces
carbon dioxide (CO2) (as illustrated in Appendix A), the amount of CO2
20 The study did not estimate non-CO2 emission due to data constraints on detailed
information of several interrelated factors including conditions for combustions and
fuel characteristics. Fugitive emissions were also not estimated due to similar reasons
as that for not estimating non-CO2 emissions.
35
emitted is calculated stoichiometrically (see Appendix H for details on
calculation).
By this carbon dioxide emission estimation approach used in this study,
emissions estimated and reported in the analyses section do not represent Ghana-
specific emissions as the estimates are not based on country electricity-specific
emission factors21. The carbon dioxide emission estimates are only indicative and for
the purpose of comparative analyses.
1.5 Limitations of the Study
Using constructs of scenarios of electricity mix pathways into the future, and
attempting to influence future energy path of Ghana through policies, creates tension
between knowledge of the future, the limits of this knowledge, and the possibility of
influencing the future. The scenarios used in this study serve to produce and to deepen
knowledge of the future. On the other hand, these scenarios expose the limits of the
knowledge of the future due to un-predictabilities, gaps and points of uncertainty in the
construction and use of the scenarios. In this regard, it must be noted that though the
scenarios constructed for the purpose of analysis in the research are based on a number
of key factors within Ghana’s energy situation (both past and present), the scenarios
21 The methodology for electricity-specific emission factors involves calculating the
total emissions from the generation of electricity within a country and dividing that
figure by the total amount of electricity produced by the country. For that matter a
country’s electricity-specific emission factors may change with changing generation
mix into the future.
36
are not necessarily comprehensive images of the future. For that matter, they do not
necessary represent the future. Rather they are hypothetical constructs of possible
futures on the basis of knowledge gained from the past and the present. This is mainly
because, the scenarios are based on assumptions about how the future might look like,
what developments might remain constant and which trends might change in the
course of time.
However, these limitations do not defeat the purpose of the study because the
study provides the reader with possible energy futures, their benefits and what policy
suggestions or recommendations can lead to such a future.
1.6 Chapter Abstracts
Chapter 1 introduces and gives an overview of the research to the reader. The
chapter does this by directing the reader’s attention to the statement of the problem, the
research questions, and why the research is being undertaken. This chapter also
presents the research framework; the system of concepts, beliefs and theories that
support and inform the research. Additionally, the chapter summaries the analytical
method, and visually presents the research design deployed by the study. The chapter
concludes by noting for the reader, the limitations of the study in terms of its internal
assumptions, data constraints, and applicability.
Chapter 2 reviews the literature on economic, environmental and social value
creation along the renewable energy and energy efficiency improvement value chains.
The chapter also does a general discussion of the common barriers associated with
renewable energy development and deployment as well as obstacles to energy
37
efficiency improvements. The chapter further reviews policy instruments for
supporting renewable energy deployment and improving energy efficiency. The
Chapter concludes by briefly looking at the socio-economic benefits of renewables in
African and focusing on the state of renewable energy policies and efforts being made
in some countries in African (namely, South Africa, Kenya, and Mauritius).
Chapter 3 reviews the energy situation in Ghana – the country of focus for this
research. On Ghana’s energy situation, the country’s sustainable development plan
through a low carbon energy pathway is discussed. The country’s energy development
within the ECOWAS region is reviewed. Key stakeholders, institutions, and policies
on the country’s power sector are examined. Challenges facing the power industry, as
well as weaknesses in the structure of the sector, are highlighted. Policy gaps towards
renewable energy deployment are noted. Energy demand and supply, as well as the
country's renewable energy potential (which can be developed to bridge the gap
between demand and supply), are reviewed. Ghana’s renewable energy and energy
efficiency policies and strategies are also examined in this chapter.
Chapter 4 describes the electrical power capacity generation scenarios assumed
for analyses. The Chapter’s main content is on the analyses of the results of estimates
on direct employment creation, consumptive water, and carbon dioxide emissions
associated with the scenarios. The Chapter evaluates the potential benefits of jobs
creation, electric power generation water-related savings and emissions reductions of
increasing renewable energy deployment in Ghana against a business-as-usual
situation. A quantitative “what-if” analysis on local content; examining the impacts on
38
employment with increasing local value creation in a decentralized renewable energy
revolution situation is also presented in this Chapter. Further, the chapter compares
estimates of total capital cost, fixed O&M cost, and fuel cost associated with each of
the three scenarios.
Chapter 5 is on the deductions on the scenario analysis of energy pathways for
Ghana (which was in chapter 4) and the implications of these deductions. The Chapter
offers policy suggestions/recommendations that can spur Ghana on in developing and
deploying more renewable energy technologies as well as achieving high national
energy efficiency improvements.
Chapter 6 consists of the conclusion and recommendations (for further studies).
Deductions based on the results of the study are made in this chapter. The study takes a
prospective view of prosumer based renewable energy deployment in Ghana. The
chapter closes by offering suggested areas for further research towards large-scale
renewable energy deployment in Ghana that has a high focus on renewable energy
prosumers.
39
Chapter 2
LITERATURE REVIEW
2.1 Renewable Energy Value Creation
“Value creation” as an economic term refers to the conversion, transformation,
processing and refinement of existing resources to new products (MWGSW, 2011).
Energy services that emphasis on renewable resources and efficiency use of energy,
can act as a facilitator of locally sensitive and desired economic opportunities, and the
eliminating of negative environmental and health impacts that have, in many cases,
accompanied conventional energy development (Agbemabiese, 2009). The deployment
of energy supports a wide variety of economic benefits, including job creation,
revenue, and income generation. However, it is claimed that renewable energy systems
create more jobs per unit of investment (REN21, 2011) as well as per unit of energy
deliverd (Wei et al., 2010) compared to conventional energy-supply systems. With
renewable energy systems, jobs created partly depends on the regional or local content
of the production and manufacturing associated with the deployment of the renewable
energy technology (Johnson, 2013). The extent of the indirect and induced effects on
the economy depends on the business activities related to the renewable energy
deployment and the structure of the economy as a whole (IRENA, 2014a). With
employment benefits, when more people are working, the benefits extend beyond the
income earned from those jobs. Direct and induced economic benefits occur when
income from renewable energy deployment activities are spent in the local economy,
generating spin-off benefits known as the ‘‘multiplier effects.’’ The spin-off effect as a
40
result of spending creates other economic activities (jobs and revenues) in different
sectors of the economy such as retail, restaurant, leisure, entertainment (Bell et al.,
2015).
A Sustainable development perspective of “value creation” goes beyond
economic benefits to include environmental as well as social benefits. These social
benefits include improved health and education, reduced poverty and reduced adverse
environmental impacts on livelihoods (IRENA, 2014a). This study views “value
creation” from a sustainability dimension and, therefore, analyzes the benefits of
renewable energy technology from the economic, environmental and social value
creation dimensions.
2.1.1 Economic Value Creation
MWGSW (2011) noted that analyzing the value chain of renewable energy is
helpful in identifying value attainable along the life-cycle of renewable energy
technologies. Figure 2.1 is a typical illustration of the stages of the value chain of
renewable energy technologies.
Figure 2.1: Life Cycle of a Renewable Energy Technology
Source: IRENA, 2014.
41
Figure 2.1 also includes the usual main supporting processes that take place along the
renewable energy value chain. As shown in Figure 2.1, a renewable energy value chain
can begin with project planning.
Project planning includes any study or preliminary work related to the
implementation of the renewable energy project. These works include for example
resource assessments, energy yield assessments, and environmental impact
assessments, planning applications, approval processes, and infrastructure planning.
(MWGSW, 2011) (IRENA, 2014a). The activities involved in project planning require
specialized and experienced personnel and the larger the number of renewable energy
projects the broader and wider the potential domestic value available (IRENA, 2014).
Manufacturing which is the next phase includes the manufacturing of
components of renewable energy technologies. These components include for instance
wind turbines and solar modules. The manufacturing of certain renewable energy
technology components can be highly capital intensive. For that matter, most
manufacturers prefer to centralize manufacturing activities and meet local, regional and
global market demands from a centralized location (Stone & Associates, 2011)
(Loomis, Jo, & Aldeman, 2013). Economic value is created in each step of the
manufacturing process, right from raw material sourcing, through component design
and fabrication.
In developing countries, local manufacturing is one of the essential areas of
reducing the cost of labor. However, increasing automation in the manufacturing
processes of some aspects of renewable technology manufacturing such as the
manufacturing of solar PV modules could lead to lower demand for labor as less
manual labor would be required. Tse (2000) noted that cost reduction should not
42
necessarily be the main aim of encouraging local manufacturing of components of
renewable energy technology systems as it could be hard to achieve this in some cases.
Tse (2000) pointed out that, instead, other motives such as the need for technology
transfer, improvement in manufacturing, and the strengthening of a country’s human
resources, and research and development base creations are also important factors to
consider. Tse (2000) noted further that local manufacturing of balance of system
(BOS) components has broader benefits. This is because the processes involved in the
manufacturing of many BOS components, as well as some of the BOS components,
can be used for other purposes. For instance, controllers and inverters meant for solar
systems can be easily adapted to other non-solar users.
In Ghana, there exists the prospect and potential for local manufacturing
through foreign investment in the country for the manufacturing of solar PV panels.
The Government of Ghana reported in February 2014 that a multinational solar energy
firm, International Solar Utilities (ISU) has plans of starting the construction of a
centralized solar PV panel manufacturing plant in the country. According to a report by
the Ghanaian government, the plant is estimated to cost $85 million and would have an
annual manufacturing output of 300MW producing 820,000 highly efficient solar
panels each year.22
22 The report indicated that the plant would manufacture PN365 Mono-Gold Line
which are highly efficient photovoltaic mono-crystalline solar panels by using a cutting
edge technology and premium quality mono-crystalline solar cells. Each PN365 solar
panel is expected to be manufactured from 72 mono-crystalline solar cells made from
pure silica with a rated output of 365 watts, and an efficiency conversion of 22%
(Government of Ghana, 2014). The report (published at the Ghana Government
Official Portal) further indicates that ISU is conducting feasibility study in the Western
Region of Ghana towards construction of solar power parks expected to add 600
megawatts of power to the nation’s grid.
43
Installation is the next segment in the value chain after manufacturing. It
includes infrastructure works and the assembling of renewable energy systems and
power plants (e.g. wind or solar systems and power plants). The installation stage can
be labor intensive as this usually requires civil engineering and infrastructure works;
including groundwork preparation, constructing foundations, channeling water supply,
and erecting buildings and constructing roads (IRENA, 2014). In the case of Ghana,
local companies can deliver most of these installation works, thereby enhancing local
value creation.
With solar PV, installation works involve installing panels and the mounting of
hardware and other balance of system components such as inverters. In the case of
wind power, transportation of wind turbines presents logistical work opportunities
locally. This is because, the components of wind energy systems usually have unusual
weight, length and shape and require special equipment to move large and heavy
cargos (IRENA, 2014). It is estimated that for an entire wind project of 150 MW,
transportation requirements could be as much as 689 truckloads, 140 railcars and eight
ships (Tremwell & Ozment, 2009). These would present considerable economic
opportunities; for locally existing transportation providers. In addition to the
transportation of turbine components, works like constructing of turbine foundation,
electrical related construction labor and laying of cables can be sourced locally.
Grid connection planning agreements for renewable energy is usually
strategized by the local grid operator. The renewable energy project developer
therefore normally accesses the requirements of the grid operator and contacts the
44
operator for a grid connection agreement. Though the agreement is between the
developer and the operator, local companies in the country can get involved in the
construction works. Local opportunities for grid connection work are particularly in
cabling within the renewable energy project - thus connecting the facility to the grid.
Grid connection therefore, has the potential for local value creation.
Operation and maintenance begin after commissioning of renewable projects.
This phase involves constant technical management and maintenance work for the
success of the project over its lifetime making it a long term activity (MWGSW, 2011).
Activities in this phase include both scheduled and preventive maintenance such as
occasional equipment inspections as well as unscheduled services such as repairs.
Typically, solar PV plants require inspection of plant components for mechanical
damage. Measurements are taken regularly to monitor the safety and performance of
modules, and these can be executed by local staff (IRENA, 2014).
Decommissioning/Reconstruction of renewable technologies takes place at
the end of the lifespan of the project, and this involves, recycling and disposal of
components. Heavy lifting services are needed in the deconstruction of a wind power
plant. Recycling of solar PV modules consists of processes that require knowledge of
solar cells, glass, aluminum, foils, copper, as well as electrical components. All these
services and process involved in reconstruction or decommissioning of renewable
energy technologies are opportunities for jobs creation. Local value creation is
enhanced in this phase where national recycling programs and related industries exist
(IRENA, 2014) (MWGSW, 2011).
45
Supporting process for renewable energy technology deployment include
policy-making, financial services, education and training (capacity building), research
and development, and consulting. These processes are necessary and occur at different
stages in of the renewable energy value chain. Policy-making is important for
increasing the portion of renewables in the national power generation mix. Well-
functioning financial markets for renewable energy projects do promote not only the
development of the renewable energy market but also impacts the economy as a whole.
Increased knowledge and trained local manpower are also crucial towards developing
and sustaining the renewable energy sector. This is because local manpower and
skilled capacity create and maintain jobs that remain locally. Local manpower capacity
also impacts positively on the economy of a country as it supports investment and
brings about profits for investors especially local investors or developers who could be
individuals, commercial or industrial entities. Table 2.1 summarizes the potential and
extent of value creation along the life-cycle of renewable energy technologies.
46
Table 2.1: Potential Value Creation along the Stages of Development of Renewables.
Potential For
Domestic Value
Creation
Stages of Development of Renewable Energy
Beginning of
Energy Project
Development
First Projects
Realized, Local
Industries Suitable
for Participating
Many
projects
Realized,
National
solar
Industry
Developing
Lifecycle Phase
Project planning Low Medium High
Manufacturing Low Medium Medium/High
Installation Low Medium High
Grid connection High High High
Operation &
Maintenance
Medium High High
Decommissioning Low Low Medium
Supporting processes
Policy-making High High High
Financial
Services
Low/Medium Medium High
Education &
Training
Low/Medium Medium Medium/High
Research &
development
Low Low/Medium Medium
Consulting Low Low Medium
Source: Extracted from IRENA (2014a).
2.1.2 Environmental Value Creation
Increasing intensely the proportion of renewable energy in a country’s
electricity generation portfolio is an excellent way of adding environmental value to
the development of that nation. For most countries, both developed and developing,
environmental pollution (of air and water) is usually linked to increased use of fossil
fuels and this usually adversely affects the quality of the ecosystem and human health.
47
Air pollutants associated with the burning of fossil fuels include the emission of sulfur
dioxide, nitrogen dioxide, carbon dioxide, carbon mono-oxide and dust into the
atmosphere. Water and land pollution from energy production include a detrimental
change to the soil, vegetation, surface and underground waters, and the marine
environment as a result of thermal, chemical or material pollution that are associated
with energy production. These polluting agents are from the activities involved in the
processing of energy fuels; mining/drilling, transportation and burning. These
pollutants are either solid, liquid, or gaseous, and they harmfully alter the natural
conditions of the environment including ecological systems. Water pollution due to
energy production activities occurs in many ways. These include effluents such as acid
mine drainage from coal mines, leaks from oil and natural gas industries, polluted rain
(acid rain) caused by emissions of SO2, NO2 and CO2 as well as discharge waste
substances containing poisonous chemicals including heavy metals (such as mercury,
lead, etc.).
Contrary to using conventional energy sources, renewable sources are less
environmentally harmful in many ways. There is far less air pollution with renewables
relative to conventional energy such as lower greenhouse gas emissions. Renewables
have lower impacts on land and water resources, and they lead to better maintenance of
natural resources in the long term.
2.1.3 Social Value Creation
In addition to economic value creation, renewable energy can bring about
social value creation of local relevance to the renewable energy deploying region or
48
country. Miller et al. (2015) defined social value as “the total value derived by an
individual or community from energy services, including economic and non-economic
value and accounting for risks, burdens, and other negative externalities” (Miller et al.
2015. Pp 67). Social value creation in many ways is incorporated into quantified socio-
economic effects of renewable energy. Breitschopf et al. (2011) noted that forms of
social benefits of renewable energy include:
Access to electricity, which enhances the possibility of learning/education
improvements in developing countries by providing evening lighting in isolated
areas.
Powering of household and medical appliances, which fosters improved health
conditions; for instance, power from solar PV panels for homes can replace
wood-fuels for heating and cooking thereby prevent health hazards associated
with wood stove cooking. Medical facilities in remote areas without grid
connection can benefit from solar power for storing vaccines.
Renewable energy social value creation includes reduced local unemployment,
improved quality of jobs (more healthy and sustainable employment), increased
community cohesion and reduced poverty levels, and all these also contribute to
achieving social sustainability.
2.1.4 Energy Efficiency Value Creation
Just as a sustainable energy supply-side-management approach of renewable
energy deployment creates value addition, demand-side-management strategies such as
energy efficiency measures also create socioeconomic and environmental value
49
addition. Improvements in energy efficiency contribute to cost savings, energy
security, enhanced competitiveness and job creation as illustrated below in Figure 2.2.
Figure 2.2: The Economic Opportunity Value Chain of Energy Efficiency
Source: Modified from ACEEE.
The opportunities for economic and social value creation range along the
energy efficiency value chain from implementation through savings obtainable, to the
“ripple” economic effects. These “ripple” economic effects are as a result of productive
spending of income from energy efficiency measures. Energy efficiency benefits for
firms and industries include a reduction in resource use, and pollution, improved
production, capacity utilization, and a decrease in operation and maintenance activities.
For power utility companies, improved energy efficiency enables the better provision
of energy services for their customers, reducing operating cost and improving profit
margins (Ryan & Campbell, 2012). Direct energy efficiency benefits for households
and business are usually in the form of reduced utility bills. According to the
American Council for Energy Efficient Economy (ACEEE), these cost savings can
have a very significant impact on the overall budget of low-income households and
small businesses. Lowering public expenditure on energy in the public sector
Energy Efficiency
Measures
(Local jobs, Energy
Security, Resource
Management, and
Industrial Productivity)
Energy Bill Savings
(Poverty Alleviation,
Public Budgets and
Currency Reserve)
Productive
Spending/Local
Investments
(Local Jobs, Health and
Social Benefits)
50
(government agencies and state-owned institutions) can improve their general
budgetary position. For a country that imports fuel, energy efficiency can help improve
upon the country’s currency reserve. Also, for a country that exports energy, energy
efficiency can free more energy for exports, and this can also improve upon the
country’s currency reserve as well (Ryan & Campbell, 2012).
In addition to cost savings, there are job creation benefits from energy
efficiency investments. Also, households or business can spend their savings money
elsewhere in the economy, and that leads to additional jobs. The ACEEE noted that,
compared to conventional energy jobs that are usually created outside the areas where
they produce and deliver the energy, most energy efficient jobs are local. This is
because energy efficient jobs consist of installing and maintaining of equipment whiles
most conventional energy jobs involve transportation and or distribution of fuels and
electricity to other territories. ACEEE also noted that most employments in the clean
energy sector including those in energy efficiency are more accessible to low-
credentialed employees compared to fossil fuel and traditional utility sector jobs.
Energy efficiency savings and accessibility of energy efficiency jobs to less credential
employees makes energy efficient programs more equitable compared to employments
in the fossil fuels sectors. Energy efficiency improvements contribute to lowering
adverse environmental impacts of conventional energy production; including
reductions in greenhouse gas (GHG) and particulate emissions, and acid rain. On the
aggregate, building energy efficiency, leads to carbon emissions reductions, and that
improves the health of our planet. According to a UNEP report titled the “Emissions
51
Gap Report: 2012,” emissions reduction of about 0.7 GtCO2 equivalents could result
from energy efficiency standards and labeling by 2020 (UNEP, 2012). All in all,
energy efficiency on the individual level, leads to improvements in human health,
reduces rising energy cost and enables the affordability of a conditioned, comfortable
and healthy indoor environment (U.S DOE, 2010).
2.1.5 Role of Local Content Requirements
Local content requirements (LCRs) are policy measures that require foreign or
domestic investors or developers to source a certain portion of intermediate goods or
equipment or a portion of overall costs from local manufacturers or producers. The
local manufacturers or producers can be either domestic firms or localized foreign-
owned enterprises. (IRENA, 2014a) (Kuntze & Moerenhout, 2013). The overall
objective of local content requirements is for either developing competitive local
industries and/or increasing local employment (Kuntze & Moerenhout, 2013).
According to Kuntze & Moerenhout (2013) local content policy requirements for
development of renewable energy are sometimes made pre-conditions for accessing
certain government supports. In cases where LCR for renewable energy is used to
target local economy, say employment, it could be designed by stipulating a minimum
required percentage of jobs to be locally hired. Where the LCR is meant to support the
development of local industry, it could specify sourcing or procuring certain local
components.
From their analysis of LCRs in national renewable energy policies, Kuntze &
Moerenhout (2013) noted that it appears that LCRs are often not well designed towards
52
national value creation. They noted further that lapses in the design of LCRs lead to
failure in the performance of LCRs in meeting set expectations. The problem is that in
many instances, LCR rates or expectations are high, resulting in the inefficient
allocation of resources and this subsequent brings about distortionary impact on trade
(Kuntze & Moerenhout, 2013). In a study to explore how local content requirements
(LCRs) can promote solar PV in India, Johnson (2013) noted that LCRs must be
restricted in duration, and a designed to evaluation its performance incorporated into it.
Johnson (2013) suggested that LCRs should be focused on technologies and
components for which local technical expertise is available and global market
pressures are manageable. The integration of LCRs with viable business promotion
tools such as a business model, and the building of skills capacity along the renewable
energy value chain are relevant for locally developing and growing a local renewable
energy industry (Johnson, 2013).
2.1.6 Value Creation from Prosumers
Renewable energy prosumerism is enhanced by a smart grid and elevates
prosumers to a level of importance; as value creators and agents of change with respect
to transactive energy in the electric power market (Rodríguez-Molina, et al. 2014).
Renewable energy prosumers can gain incentives or compensations for flattening
energy consumption during peak demand hours. Other demand response strategies that
can create value for prosumers is electricity price payments tailored to incentivize
higher prosumer generated power supply during high wholesale market prices.
53
Residential prosumers who own their systems would be able to obtain the full
value of their systems and this would lead to a greater local economic multiplier effect
than non-prosumer renewable systems that are owned and operated by non-local
developers (IEA-RETD 2014). Industrial prosumers of renewable energy can deploy
their waste or by-products such as bio-energy resources as well as forest and
agriculture wastes to generate electrical energy for use in their operations and also for
local community development priorities. In this way, industrial prosumers, especially
those in the agro-industry operating in rural or remote areas can assume the role of
rural energy entrepreneurs by serving electricity to their communities as part of their
product line (UNIDO 2015), and by so doing obtain additional revenue. In places
where grid power supply is unreliable, industrial prosumers can increase production
efficiency and reliability by reducing power outage related downtimes. They would
also be able to reduce production cost, emissions and pollution in terms of industrial
waste (solid and liquid) if these waste can and are converted into useful energy. By
reducing environmental pollution, industrial prosumers would be advancing their
corporate social responsibility and creating local green jobs at the same time through
their operations of converting waste or by-products into energy (UNIDO 2015).
Overall, renewable energy residential and industrial prosumerism advances the
addition of local value creation through the use of local resources, thereby reducing the
dependence on imported energy resources (UNIDO 2015).
54
2.2 Barriers to Renewable Energy Deployment
Barriers to renewable energy deployment can stem from financial or economic
challenges as well as non-economic challenges including technical and regulatory and
administrative bottlenecks. IEA (2011) noted that though there exist different types of
barriers to renewable technology deployment, these obstacles are usually linked and
work together to hinder deployment. Figure 2.3 shows some possible barriers that
impede the deployment of renewable energy and how these are interlinked.
An economic barrier to renewable energy deployment is said to exist if the cost
of a given technology is above the cost of competing alternatives (IEA, 2011). Some
renewable energy technologies are cost-competitive at places where resources and
market conditions are favorable. However, in many places and instances, the cost of
renewable energy technologies have been the major economic barrier to deployment.
This is usually because, these renewable energy technologies are not yet economically
competitive compared to their conventional counterparts (IEA, 2008).
55
Figure 2.3: The Interconnectedness of Barriers to Renewable Energy Deployment.
Source: IEA, 2011.
Non-economic barriers can lead to higher cost or hinder the development of
renewables altogether. Lamers (2009) categorized non-economic barriers to include
the following: regulatory and policy uncertainty barriers; institutional and
administrative obstacles; market barriers; financial barriers; infrastructure barriers;
public acceptance and environmental barriers; as well as lack of awareness and skilled
personnel.
Müller et al. (2011) noted that though economic and non‐economic barriers
could exist in all phases of development of renewable energy, different barriers or
challenges tend to be prevalent with particular developmental phases. Figure 2.4
shows these various developmental phases and their associated barriers or challenges.
56
Note on figure:
Cell shading reflects the relative significance of individual challenges along the
deployment path. Light shading suggests that intervention is required but not with the
highest possible priority. Dark shading indicates high importance of the respective
intervention.
Figure 2.4: Deployment Phases of Renewable Energy Technology and Associated
Barriers.
Source: IEA 2011.
2.2.1 Inception Phase Challenges and Barriers
The inception phase is the period when the first examples of the renewable
energy technology are deployed. Significant barriers during the inception phase include
the following:
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establishing the costs and potential of the technology so as to be able to set
targets in an informed way;
establishing the feasibility and credibility of deploying the technology via pilot
or demonstration plants;
ensuring that grid or market access can be achieved;
developing the institutional capacity required to manage and monitor
deployment (e.g. permitting issues);
establishing a supply chain capability (including local installers, maintenance,
and contractors); and
identifying and tackling other institutional barriers in implementing initial
deployment.
2.2.2 Take-Off Phase Challenges and Barriers
The take‐off phase represents the period of rapid market growth leading to
extensive deployment of the technology. During the take-off phase, challenges that
require particular intervention include the following:
providing the right support structures that lead to deployment as effectively and
efficiently as possible;
continuing to tackle and remove non‐economic barriers; and
helping an indigenous supply chain to develop.
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2.2.3 Consolidation Phase Challenges
The market consolidation phase represents the period of deployment when the
technology growth approaches maximum achievable level. With much growth having
occurred in the consolidation phase, challenges and barriers relating to the following
become more prevalent:
grid integration issues;
public acceptance and;
integration into energy market once financial support is no longer required.
Cost at the inception phase may be relatively high when initial deployment of
renewables technology under commercial terms is being undertaken and this may
restraint desirable deployment. During the take-off phase, the market begins to grow
quickly, and costs may fall. Policies may, therefore, be strategized by designing
incentives and deployment levels in a way so as to secure deployment in a controlled
way in terms of the overall policy cost. Also, more widespread deployment can be
promoted if costs fall. During the consolidation phase, deployment usually grows
toward the maximum viable level.
Through the different stages of deployment, challenges evolve and so do
policies required to overcoming these challenges change. Key policy instruments to
support renewable energy deployment are reviewed in the section following.
2.3 Renewable Energy Policy Instruments
In additional to falling prices, policies instruments account for the increase in
investment in renewables in recent years throughout developed and developing
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countries. In 2005, only 55 countries globally had some form of policy target or
renewable energy support policy at the national level. By early 2011, this number had
more than doubled to 118 countries with developing countries representing more than
half of all states with renewable energy policies (REN21, 2011). Renewable energy
policy instruments can be categorized into regulations and standards, quantity tools and
price instruments.
2.3.1 Regulations and Standards
Regulations and standards are usually aimed at increasing the relative
attractiveness of renewable energy technologies, and they can be deployed directly or
indirectly in promoting the deployment of renewable energy technologies (Benitez,
2012).
Direct application of regulations and standards specifically target renewable
energy technologies. A typical direct application of regulations and standards is
through renewable energy mandates. Renewable energy mandates require a percentage
of the energy requirement of equipment or building to come from renewable energies.
Some countries and jurisdictions have amended their national or local building codes
to include renewable energy mandates, obligating new buildings to reduce their
reliance on conventional energy sources. One such mandate is the solar hot water
mandate. The solar hot water mandate is spurring on the development of solar thermal
systems in many countries including South Africa, Israel, India, Spain, Brazil, and
Tunisia. In Brazil, residential solar thermal systems (STSs) grew by 16-21% in 2012
and the country is poised to export its locally produced solar thermal systems to other
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countries. In India, STSs increased by 26-30% in 2013 (with 61% of the Indian STS
market in the industrial sector) (REN21, 2014). According to Stier (2014), South
Africa has the largest STS market in Africa. The country also has the most ambitious
STS target - to install 1.3 million STS within the next five years. Additionally, the
South African government has provided rebates for locally manufactured, pressurized
STSs to stymie the import of cheap ones. Though Tunisia’s STS market was small, it
increased tenfold between 2004 to 2012 as a result of support from the Tunisian
government in the form of loans and grants (Baccouche, 2014).
Indirect regulations and standards tend to target non-renewable power sources.
Typically, the aim of indirect regulations and standards is to limit the use and/or
increase of non-renewable energy sources. This is usually done by raising the costs of
electricity generated from non-renewable sources, thus rendering renewable energy to
become relatively more attractive financially. Technology standards that set strict
emission standards or other performance standards for power generating plants
discourage the development of fossil-fuel based power plants. In the absence of any
renewable energy policies, the cost of natural gas or coal power generation would
usually for now be lower than the cost of generating electricity from renewable
sources. Introducing a policy of carbon-capture and sequestration in such a situation
would make renewable electricity more cost competitive compared to generation from
natural gas or coal. Thus, the regulation of the non-renewable energy sources (like
natural gas or coal power plants) would reduce the feasibility of generation from these
conventional sources and promote generation from renewables.
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2.3.2 Quantity Instruments
Quantity instruments are market-based instruments that define a specific target
or absolute quantity for renewable energy production. The two primary types of
quantity instruments are renewable portfolio standards (RPS) and renewable energy
certificates (REC). In some jurisdictions, RPS is also known as renewable electricity
standards, or renewable obligations or mandated market shares. These two instruments
- RPS and REC are interrelated and implemented in tandem.
In deploying renewable portfolio standards, authorities or regulators define for
energy suppliers or utilities a share of electricity that must come from renewable
sources with the aim of promoting renewable electricity in a competitive market. The
energy suppliers or utilities then comply by either producing the renewable electricity
themselves or buying RECs (sometimes called green certificates) from other generators
which have been put on the market (IEA, 2013) (IRENA, 2014a). Since energy
suppliers can use tradable REC to meet their obligations, REC thus increases the
flexibility of the RPS policy and can help lower the cost of meeting compliance. REC
represents the renewability attribute of a certain amount of electricity and not the
electricity itself. Therefore, the idea of tradable renewable energy certificates (also
known as tradable green certificates (TGC) is based on distinguishing the actual power
sold and its “greenness.” Hence, RECs can be bought and sold bundled, that is with the
real electricity, or RECs can be sold and purchased unbundled, that is independently
(without its electricity). Though the supply of RECs come from renewable energy
producers, the demand for RECS can come from either a consumer through voluntary
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markets or from utilities through the compliance market. The price at which RECs are
sold or bought usually depends on the demand and supply of RECs in the market, and
that determines the financial incentive that the producer receives. When RECs are
transacted bundled, the purchaser can determine which electrons they receive through
the grid (whether they are from solar or any other renewable sources). Certain RPS
legislations obligate energy suppliers to either produce a certain share of renewables
from a particular technology. This is referred to as technology set aside, tier or carve-
out. One common technology set-aside is the solar set-aside from which the solar
electricity generated earns solar renewable energy credits (SRECs), which are also
tradable.
Unlike REC compliance markets where utilities and electricity distributors
purchase RECs to meet their formal RPS obligations, voluntary markets are usually not
linked to formal RPS targets. Therefore, consumers in the voluntary market purchase
REC usually to demonstrate their use of renewable and clean electricity and also as a
way of providing direct incentives to renewable energy producers (U.S. EPA, 2008)
(IEA, 2011). A REC tradable scheme usually consist of three principal actors: 1) the
suppliers of REC - who are the renewable energy producers, 2) the regulator (often a
public entity) - who issues the REC23 to the renewable energy producers and oversees
23 One unit of REC is usually issued for one megawatt hour (MWh) of renewable
energy produced or distributed. However, credit multipliers are used where there are
considerations as to whether every MWh of energy generated should be treated equally
and awarded a single REC. In which case, generation from a specific renewable energy
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REC trading on the market to ensure generation is verified and RECs are not double
counted, and 3) the REC purchasers - who are electricity producers (or distributors) in
the compliance market or consumers in the voluntary market (U.S. EPA, 2008). A
REC (and for that matter a SREC) tradable schemes typically charge utilities or the
energy suppliers a stipulated fine if renewable energy quotas ar not met. This penalty
in most instances determines the upper limit value of the renewable energy certificates
traded (IEA, 2011).
Several countries including Italy, Belgium, Australia, Japan, Sweden, the
United Kingdom, United States of America and India have used the quantity
instrument of RPS to support their renewable energy development programs. As of
2013, RPS of various targets had been adopted by 30 states and the District of
Columbia in the United States with the majority of these RPS allowing REC trading
(Warren, 2013). In 2008, India set its national RPS (known as Renewable Energy
Purchase Obligation) to produce 15% of the country’s electricity from renewable
energy sources by 2020. The country introduced REC trading into its RPS in 2011 to
ensure compliance with its state-level targets are more flexible (Parmar).
2.3.3 Price Instruments
Price instruments aim at reducing cost and pricing-related barriers to renewable
energy deployment. Price instruments come in two forms; fiscal incentives and price-
could be given multiple RECs or a fractional REC per unit of electricity generated
(U.S. EPA, 2008).
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setting policies (World Bank, 2008) (Azuela & Barroso, 2011). Price-setting policies
involve putting in place pricing systems, structures or mechanisms that are favorable to
renewable energy deployment to facilitate the deployment of renewables (World Bank,
2008). While financial incentive policies provide financial and fiscal incentives for
investments in renewable energy by reducing the costs of such investments (Azuela &
Barroso, 2011).
2.3.3.1 Fiscal Instruments
Azuela & Barroso (2011) noted that there are four categories of fiscal
incentives for grid-connected renewable energy technologies. These categories are: a)
reducing upfront capital costs (via grants); b) providing loans, loan guarantees and
other financial assistance; c) reducing capital or operating costs (via tax credits); and
d) enhancing revenue streams through carbon credits.
Grants or rebates and direct cash are different types of fiscal assistance from
governments to lower system investment costs to support the development of
renewable energy projects. Grants to support grid-connected renewable energy projects
can come in the form of “buy-down grants” or “development grants” (Azuela &
Barroso, 2011). Buy-down grants are often used to support promising renewable
energy technologies that are not yet commercially viable. Hence, they are often used in
supporting demonstration projects and seldom used to promote market deployment.
Development grants are for assisting to lower the high cost of development of grid-
connected renewable energy projects especially in new markets (Azuela & Barroso,
2011). In industrialized countries, where renewable energy technologies have gained
65
track record, and there exist mature capital markets, one of the usual means of
financing renewable energy projects is long-term loans. However in most developing
countries, especially in Africa commercial loans are usually unavailable because of
lack of technological experience and the high level of risk perceived by lenders
(Azuela & Barroso, 2011). In addition to grants and loans, tax policies are also used to
support the deployment of renewable energy.
Tax incentives are often used complementarily with other renewable energy
support policies. In order to facilitate a level playing field with the conventional energy
sector and encourage renewable energy deployment, incentives in the form of tax
exemptions on part or all taxes are usually offered to renewable energy developers.
These tax incentives and credits normally take various shapes and forms. They can be
designed to impact both investment decisions (supply) and consumption decisions
(demand) (Clement, Lehman, Hamrin, & Wiser, 2005). A summary of common tax
incentives and credits for supporting renewable energy deployment are listed in Table
2.2 below.
Table 2.2: Common Tax Incentives for Renewable Energy.
Tax Incentive Description Comment
Investment tax
incentives:
large-scale
applications
Provide income tax
deductions or credits for
some fraction of the capital
investment made in
renewable energy projects.
Income tax deductions reduce
taxable income, while tax credits
directly offset taxes due.
Sometimes there are investment
size minimums and maximums to
qualify for tax credit.
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Tax Incentive Description Comment
Investment tax
incentives:
customer-sited
applications
Tax deductions or
credits are offered for some
fraction of the costs of
renewable energy systems
or
equipment installed in
residences and businesses.
Usually, the cost of installing the
equipment (in addition to the
equipment cost itself) is included
in the calculation of the tax
incentive.
Production tax
incentives
Provide income tax
deductions or credits at a set
rate per kilowatt-hour
produced by renewable
energy facilities.
It encourages efficient, renewable
energy production rather than
large investments of capital (a
potential outcome of high
investment-based tax incentives).
It ensures long-term and efficient
production of renewables.
Property tax
reductions
Owners of land or real
property used for renewable
energy production facilities
can have their property
taxes reduced or eliminated.
Can be an especially important
incentive for capital-intensive
technologies as property taxes
often contribute to a higher per
kilowatt-hour tax burden for
capital-intensive renewable
energy technologies than for less
capital intensive conventional
energy technologies.
Value-added
tax (VAT)
reductions
Exempts producers of
renewable energy from
taxes on up to 100 percent
of the value added by an
enterprise between
purchase of inputs and sale
of outputs.
Typically, it is applied to the
production of renewable energy
and the domestic manufacturing
of renewable energy parts,
equipment, and systems. Some
countries collect the full tax but
refund a portion of the tax applied
to renewable energy production
and equipment.
Excise (sales)
tax reductions
Exempts renewable energy
equipment purchases from
up to 100 percent of excise
(sales) tax for the purchase
of renewables or related
equipment.
It impacts the demand for
renewables and equipment. Some
countries tax electricity
consumption but provide an
exemption for electricity
produced by renewable
technologies. Others exempt the
purchase of renewable energy
plant and equipment from
sales taxes.
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Tax Incentive Description Comment
Import duty
reductions
Reduces or eliminates
import duties on imported
equipment and materials
used for renewable energy
production facilities.
Is useful in the early stages of the
renewable energy industry, before
a host country has its equipment
manufacturing facilities and the
technical knowledge to compete
in the world market. It can vary
by technology depending upon
the status of domestic
manufacturing.
Accelerated
depreciation
Allows investors in
renewable energy facilities
to depreciate plant and
equipment at a faster rate
than typically allowed,
thereby reducing stated
income for purposes of
income taxes.
The benefits are “front-loaded”
compared to some other tax
incentives. It heavily shields
income from taxes in the earliest
years of investment; it has a large
impact on net present value
calculations used for investment
decisions. It is an especially
effective incentive for
capital-intensive industries like
renewable energy that require
large up-front capital
investments.
Research,
development,
demonstration
(RD&D), and
equipment
manufacturing
tax credits
Tax credits are offered for
up to 100 percent of the
money invested by a
corporation in renewable
energy technology
development, including the
manufacturing processes
RD&D and equipment
manufacturing tax incentives are
intended to create local
technological innovation and
build domestic businesses. Many
countries and states offer
renewable energy RD&D
funding, not tax credits.
Tax holidays Reduces or eliminates
income, VAT, or property
taxes for a temporary period
of up to 10 years
They are "front -loaded" benefits
and therefore typically offered as
an initial investment incentive,
with the expectation that after the
exemption expires, the renewable
energy company will begin
paying taxes at the normal rate.
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Tax Incentive Description Comment
Taxes on
conventional
fuels
Some countries tax the
consumption of
nonrenewable
energy (this is most often a
fossil fuels or carbon tax).
The absence of this tax on
renewable energy can act as
an incentive for consumers
to use or buy renewable
energy (e.g. instead of
energy from fossil fuels).
Taxing fossil fuels or the
emission of pollutants and
greenhouse gasses is an indirect
tax incentive to purchase
renewable energy, to the extent
that renewable energy sources are
exempt from paying the tax on
conventional fuels. Taxes may
vary with the amount of
emissions or be assessed at a flat
rate per unit of fuel consumed.
Source: Based on Clement, Lehman, Hamrin, & Wiser, (2005).
2.3.3.2 Feed-in-Tariff Policy
Another price instrument in addition to fiscal incentives for promoting
renewable energy deployment is feed-in-tariffs (FIT). Feed-in-tariffs are the most
popular policy or support scheme for grid-tied renewable energy systems, especially in
high and middle-income countries. A FIT scheme can be at the national or regional
level, and it can also be granted by utilities themselves outside a national policy
framework (IEA, 2013). The concept of FIT is that electricity produced by eligible
generators and added to the grid is paid a predefined price per every kWh and
guaranteed during a fixed period. The design and operation of a FIT scheme therefore,
normally involves three key incentives: a) a preferential tariff, b) guaranteed purchase
of the electricity produced for a specified period, and c) guaranteed access to the grid.
Establishing the level of preferential tariff can be one of the most difficult, and
important aspects of a FIT policy design. FITs are typically differentiated by four
distinguishing characteristic: 1) technology neutrality, that is when the same levels of
69
remuneration are paid to all renewable energy projects, regardless of technology or the
tariff level may be specific to different renewable energy technologies; 2) FiT tariffs
that are flat and pay the same level of remuneration to all plants of the same
technology; 3) FITs that are fixed and pay a certain degree of remuneration per kWh of
electricity generated or premium on top of the electricity prices; and 4) FITs that can
remain constant over time or based on digression factors that account for the
technology improvement, innovation, and learning. Theoretically adjustment to
inflation can be included in a FIT scheme. However, this is rarely done (IRENA,
2014)(IEA 2013). FIT can also be designed to have a cap which could be in the form
of a limit on the total expenditure for support (as in Malaysia) or a restriction on the
amount of capacity that can benefit from the FIT support in a certain time period
(Müller, Brown, & Ölz, 2011). A typical way to use FIT schemes with a financial cap
is the “call for tender” approach. It involves a generator going through a tendering
process to get the FIT contract. The process can be on a competitive basis (as was in
France), or it can be just an administrative process (as was in Spain). This process can
be used to promote specific renewable energy technologies or impose additional
regulations (such as local content requirements) to renewable energy (IEA, 2013). A
recent development in the design of FIT introduced in Germany is called the
“breathing cap” concept. The “breathing cap” concept regulates a FIT depending on
the previous year before. With this concept, the tariffs are reduced if installations
exceed a certain target. The cost of FIT can be supported through a number of ways
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including taxpayers money or levy on electricity consumers through electricity bill (as
is in Austria, Germany, France and Italy).
FIT is one of the key policy instruments used in a number of developed
countries to incentivize the development of renewable-energy generation. However, its
application in many low and middle-income countries is not well established (Deutsche
Bank, 2010). This is because of the high degree of risk perceived by many investors,
financiers, and developers in many low and middle-income countries. In an attempt to
mitigate these perceived risks, the Deutsche Bank (2010) designed the Global Energy
Transfer FIT (GET FIT). The objective of the GET FIT is to leverage international
public-private funds to support and de-risk national FITs by providing transparency,
longevity and certainty to investors and financiers of renewable energy in such
countries. The idea of the GET FIT is based on three key pillars; an international fund
to support renewable energy incentives, a combination of risk mitigation strategies, and
the provision of technical assistant (Deutsche Bank Group, 2010).
2.4 Barriers to Energy Efficiency
Barriers to cost-effective energy savings can be classified into three categories:
a) market failures; externalities, split incentives and incomplete information; b)
behavioral barriers; energy efficiency paradox, perception of energy efficiency risk;
and c) government failures; artificial electricity pricing, fossil-fuel subsidies, and
supply-side investment bias. These factors are detailed below.
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2.4.1 Market Failures
An Environmental externality is one of the market failures that encourages the
overuse of energy relative to the social optimum, and hence, underinvestment in
energy efficiency and conservation (Gillingham et al. 2009). Such externalities include
greenhousoe gas (GHG) pollution, particulate pollution, and water pollution. Since
energy prices do not usually internalize these externalities, the market does not provide
a level of energy efficiency that high. Unless the overall societal costs of these
externalities are factored into the price paid for energy, inefficient energy use may
become difficult to discourage. One way to overcome this is through energy efficiency
legislation.
Split incentives between building developers and tenants is another major
market failure that hinders energy efficiency investments and for that matter, energy
efficiency improvements. In the absence of mandatory building regulations or
requirements, investment decisions including those decisions involving the energy
features of a building made by building developers and investors do not often include
installed energy efficient features. However, tenants who come later to occupy such
buildings may have differing incentives regarding the energy characteristics of the
building as the building’s energy use becomes the responsibility of the tenant. Such
differing incentives between landlords and tenants hinder building energy efficiency
improvements leading to over-consumption of energy (Gillingham et al., 2010).
Gillingham et al. (2010) pointed out that another way by which split incentives can
72
lead to overconsumption of energy is when the landlord pays the energy bill and
cannot influence the choice of energy consumption by the tenant.
Availability of information on energy efficiency is important for consumers to
make energy efficiency choices and overcome market failures. However, lack of
information and asymmetric information are often the reason for systemic
underinvestment in energy efficiency. According to Gillingham, et al., (2009), as
consumers lack adequate information about the difference in future operating costs
between high energy efficient and less energy efficient goods and strategies they are
unable to make proper investment decisions. Gillingham et al. (2009) explained that in
line with cost-minimizing behavior; as it is expected that under perfect information
consumers would reach privately optimal outcomes. Information challenges can also
result from behavioral failures towards energy efficiency.
2.4.2 Behavioral Barriers
In a situation of perfect information on the cost-savings benefits and
opportunities for energy efficiency, individuals and companies sometimes fail to make
rational decisions in their energy-use. The paradox of lack of investment in energy
efficiency in a situation of perfect information and easy access to capital at a relatively
low price is usually due to uncertainty associated with the returns from investments.
Schleich and Gruber, (2008) observed that, uncertainty in investments in energy
efficiency, is widely caused by stochastic future energy prices. However, investments
in energy efficiency tend to lower the energy bill and thus reduce the financial risks
associated with energy price uncertainty.
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One other behavior related obstacle to energy efficiency improvement is what
is called the “energy efficiency paradox.” This can be said to occur when individuals or
companies tend to compensate for energy efficiency gains by finding ways to use more
energy. This phenomenon of energy efficiency paradox is also referred to as the energy
“rebound effect.” In defining the different components of the rebound effect,
Gillingham et al., (2014) explains that classical view of the rebound effect assumes that
an improvement in energy efficiency is “lost” due to the sum of consumer and market
responses – thus, a change in energy efficiency is bundled with changes in other
product attributes. Gillingham et al., (2014) further distinguished this classical view of
the rebound effect from the view that considers it as an exogenous increase in energy
efficiency when holding all other product attributes constant. Whatever the views on
energy efficiency rebound effects, it beholds on governments to make all the necessary
efforts at maintaining and raising energy efficiency improvements. These include
nudging energy use behavior towards transforming behavior, in the direction of
sustained energy efficiency improvements (Newell & Siikamäki, 2013).
2.4.3 Additional Market Barriers
Certain government policies and regulations that drive inappropriate decisions
in the energy market can result in economically inefficient levels of investment in
energy efficiency. For instance, policies to keep electricity or fuel prices artificially
low, and also the use of fossil fuels production subsidies. These practices directly
conflict with energy efficiency objectives. A government that maintains these
74
distortionary policies while simultaneously attempting to improve energy efficiency
would be fighting itself in a losing battle.
Government failure can also occur when efforts are solely aimed at the energy
supply side. This usually happens when demand-side investments are perceived as
burdensome because they involve large numbers of small consumers. Also, policies
designed to promote energy-efficiency can constitute government failures if they
accidentally create perverse incentives. Policy monitoring and evaluation is one of the
ways to guard against adverse policy effects that can lead to these failures.
The next sub-section discusses policy instruments and measures to correcting
market failures, filling informational gaps towards energy efficiency improvements,
and abolishing distortionary policies that mitigate cost-effective improvements in
energy efficiency.
2.5 Energy Efficiency Policy Instruments
Usually, the first step in policy making towards energy efficiency
improvements is to set energy efficiency targets. In many jurisdictions in the world,
policy instruments have been deployed to overcome barriers and to spur on energy
efficiency improvements. These policy tools are categorized as regulatory instruments,
information and communication measures, and market-based instruments.
2.5.1 Regulatory Instruments
Regulatory instruments for improving energy efficiency usually include
minimum energy performance standards (MEPS), regulations for designated sectors
and building energy codes. The above instruments are referred to as command-and-
75
control approaches and are characterized by low flexibility and in some cases high cost
of implementation (Markandya et al., 2014). Minimum energy performance standards
are usually mandated for a range of appliances including lighting, building materials,
motors, boilers, vehicles and other industrial equipment. While “labeling” of products
provides information to consumers, MEPS are meant to compel the worst energy-
performing goods and technologies off the market. MEPS are such that, they ceases to
spur further improvements in energy efficiency when inefficient technologies are
phased out. However, regularly review and revision of standards can lead to
continuous improvement in product efficiency through MEPS (CLAPS).
Process-oriented energy efficiency standards are usually mandated for certain
designated consumers. For instance, energy audits, energy consumption reporting, and
the requirement to have an energy manager, and energy savings plans can be some of
the practices for designated customers. Regulations for designated customers are
usually deployed to complement other energy efficiency programs that provide
incentives to carry out energy efficient investments.
The implementation of building energy codes (BECs) is another approach to
promoting energy efficiency improvements. Building energy codes (BECs) are the
minimum legal requirements for energy-efficient design and construction of new and
renovated residential and commercial buildings. BECs set an energy-efficiency
baseline for the building envelope, systems, and equipment. Usually, the objective of
BECs is to put in place progressive standards for building practices that guide all
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aspects of the design and construction of buildings. BECs also serve to encourage
market innovation towards the achievement of compliance (U.S DOE, 2010).
The three key features of building energy codes are the technical requirements,
compliance and enforcement, and complimentary policies (which serve as compliance
tools). Usually, maximizing the technical requirements involves reducing building
energy loads, using efficient systems to serve the load and substituting renewable
energy sources for conventional ones. Reducing energy needs can be done by
minimizing space heating and cooling, and lighting loads through energy efficient
building and site designs. The technical requirement aspects of BECs involves the
building energy code substance. This includes the building envelope - walls, floors,
roofs window, doors, and others. The heating, ventilating and air conditioning (HVAC)
systems, installed equipment, and renewable energy usage (for passive solar heating
and passive cooling24) are also included in the technical requirements of BECs.
Building energy codes can be designed to be either prescriptive or
performance-based or a hybrid. Prescriptive-regulated BEC approach applies to
specific building components and mandates the minimum energy requirements for
HVAC systems, service water heaters and lighting systems. Performance-based BECs
on the other hand, regulate the buildings’ annual net energy consumption and specifies
24 In passive solar building design, windows, walls, and floors are made to collect,
store, and distribute solar energy in the form of heat in the cold season or winter and
reject solar heat in the summer.
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appropriate methodologies for calculating the energy consumption of component
systems. Prescriptive approaches offer simplicity whiles performance approaches
enable flexibility in compliance. The hybrid approach is a prescriptive BEC with
elements of performance code requirements for particular building systems.
Building energy codes enforcement is essential to ensure compliance. BECs can be
mandatory or voluntary.
2.5.2 Information Instruments
Information and communication measures include using labeling (of products
or services), public awareness campaigns on energy efficiency as well as training in
energy efficiency matters. The primary objective of information and communication
measures is to increase awareness among consumers of the financial and societal gains
obtainable from energy efficiency and to make known unto them the various energy-
efficiency options that are available. Labeling promotes transparency and helps
consumers to understand the overall costs of available energy efficiency options.
Providing information on energy efficiency facilitates investment decision making on
what energy efficiency options to invest in and deliver to consumers.
Labelling as a tool is meant to reduce informational barriers to energy
efficiency improvements. Energy performance labeling can be voluntary or made
mandatory. Performance labels (also known as comparative labels) inform consumers
of the relative energy efficiency of appliances, buildings, and vehicles. Endorsement
labeling is usually non-mandatory and is used to convey to consumers that a product is
of the highest performance; energy-efficient-wise. Labelling also provides an incentive
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for manufacturers to distinguish themselves from competitors by designing and
manufacturing more energy-efficient products. Mandatory performance labeling
schemes have enforcement mechanism in place, and this makes them more effective
compared to voluntary schemes where manufacturers, importers and seller are not
under any obligation to provide energy efficient products on the market.
Labeling and public awareness campaigns are complimentary towards spurring
on improvements in energy efficiency. Whiles labeling focuses on making available
information on cost-efficient energy efficiency options to consumers, public awareness
campaigns are geared more towards advocacy with the focus of encouraging better
energy-efficient choices. Creating capacity for implementation of energy-efficiency
measures or programs requires training and education in energy efficiency options,
technologies, and practices.
2.5.3 Market-Based Instruments
Market-based instruments for spurring improvements in energy efficiency can
be classified as price instruments (economic and fiscal) and quantity instruments
(energy savings obligations and carbon markets). In contrast to regulatory instruments
(also known as command and control measures), market-based instruments have the
objective to encourage or discourage economic decisions. This is achieved by indirect
changes in prices, thereby altering the incentive structure of the market for energy or
energy efficient technologies (Markandya et al., 2014).
Price instruments (both economic or fiscal incentives) can be used to either
lower the cost of investing in energy efficiency, or raise the cost of inefficiency by
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internalizing the cost of externalities (such as carbon emissions) through taxes. Thus,
taxes and permits can be used to penalize energy consumption while subsidies and tax
deductions can be used to stimulate energy savings (Markandya, Labandeira, &
Ramos, 2014).
Economic incentives such as subsidies can be set as a percentage or a fixed
amount per purchase or investment. Such incentives are used to help initially
expensive, but cost-effective energy efficiency investments to compete against cheap
but inefficient options. Other economic incentives such as soft loans for energy
efficiency investments and direct government subsidies can be used to lower the price
of energy efficient products.
2.5.4 Public Sector Energy Efficiency Measures
In every country, there are opportunities for more efficient energy management
of government’s facilities and operations. Improving energy efficiency at all levels of
government can result in lower energy costs to public agencies. This also reduces
demand on capacity-constrained electric utility systems, increases energy system
reliability, and reduces emissions of greenhouse gasses and local air pollution. Also,
the government sector’s buying power and visible leadership offers a powerful, non-
regulatory means to stimulate market demand for energy efficient products and
services. Government’s increased demand for energy efficient goods and services can
trigger a positive response from domestic suppliers, encouraging them to introduce
more energy efficient products at competitive prices once the public sector has
established a reliable entry market. A government's practical participation in energy
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efficient through the public sector can help build the government’s capacity for
managing energy efficiency programs as well as demonstrate its dedication to
sustainable development. Towards this, a government can embark on a range of viable
short-term, cost-effective regulations that can save government resources and deliver
other co-benefits.
2.6 Socioeconomic Benefits of Renewable Energy in Africa
It is asserted that high levels of poverty in most countries in Africa are as a
result of low levels of modern energy use and that access to modern energy alleviates
poverty. On the other hand, others claim that increasing household income leads to the
use of modern energy options (Pachauri, et. al. 2004), (Karanfil, 2009). A number of
studies on the consumptive use of modern energy (of electricity) in some countries in
Africa indicate that electricity has mostly had positive socioeconomic impacts in these
countries. Some of these effects include improved livelihoods, access to water,
agricultural productivity, improved health and education, and gender equity (Obeng et
al., 2008) (Kankam & Boon, 2009) (Bensch et al., 2011).
In Ghana, solar home systems have led to the decrease in expenditure for
kerosene, candles, and dry cell batteries (Obeng et al., 2008). Also in Ghana, the
introduction of solar PV systems in rural communities provided lighting and motive
power for productive use and supported mico-enterprises (Obeng, et al., 2008) (Obeng
& Evers, 2009) (Kankam and Boon, 2009). In other countries in Africa, for example in
Rwanda, between 5 and 15% of households in peri-urban areas use low voltage
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renewable energy for productive use (Bensch et al.(2011). In Senegal, about 12.5% of
peri-urban businesses use electricity for productive purposes (Fall et al., 2008).
According to the Worldwatch Institute (2013) there is a swift rate of
renewables policy-making at the national level in a number of countries in sub-Saharan
Africa. With countries like Ghana, Kenya, Algeria, South Africa, Egypt, Tanzania,
Rwanda, Namibia, Nigeria and Mauritius and others making efforts at joining the
large renewables deployment track emerging globally. The rest of this section reviews
a number of countries on the African continent among others where some form of
renewable energy policies and efforts are being made at the national level. The
objective of reviewing these efforts is to take cognizance of some lessons what could
be replicated in the case of Ghana as well as to note what to avoid. The countries
reviewed are South Africa, Kenya and Mauritius.
2.6.1 South Africa
South Africa’s renewable energy efforts are driven by the demand for more
energy and the government’s recognition of the need to reduce greenhouse gases since
the country’s electricity mix is predominately (about 80%) from coal (Renewable
Energy Ventures, 2013). A unique aspect of the country’s renewable energy
deployment is its focus and emphasis on local content for promoting the country’s
renewable energy industry. South Africa’s renewable energy projections in 2003
included adding a target of 10,000 GWh of renewable energy generation by 2013 from
the following resources; bagasse (59%), solar water heating (13%), hydro (10%),
landfill gas (6%), other biomass (1%) and wind (1%). Driven by increasing demand for
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energy, the country’s Department of Energy mandated an additional 17.8 GW from
renewables by 2030 in its long-term plan - the ‘Integrated Resource Plan (IRP) 2010-
30 for Electricity.” The country’s national energy policy goal as of 2011 was to
achieve a 10% share of total installed capacity for wind and PV technologies by 2020,
and 20% by 2030. The plan for this total renewable energy capacity target is outlined
in South Africa’s finalized IRP of 2011, which gives the capacity breakdown by
technology as 42% of new generation from solar PV (8.4 GW), wind (8.4 GW) and
CSP (1 GW) (Montmasson et al. 2014). On the other hand, the South African
Department of Energy is committing to building six new nuclear reactors of total
capacity of 9,600 MW.
South Africa’s renewable energy feed-in tariff was introduced in 2008,
however before the FIT could take off it was replaced with a public bidding process
instead and the resulting program, now referred to as the Renewable Energy
Independent Power Producer Procurement Program (REIPPPP), has successfully
channeled significant private sector expertise and investment into grid-connected
renewable energy in the country at competitive prices (Eberhard et al. 2014). The
primary reason for the substitution of the FIT was that, it was criticized by developers
and investors for allocating too much risk to IPPs as the different stakeholders were not
able to agree on how to apportion these risk (Baker, 2012) (Montmasson et al. 2014).
Through the Renewable Energy Independent Power Producer Procurement Program
(REIPPP), a tendering allocation was used in the bidding process by prospective
developers. A cap was set in the bidding documents to which bidder’s proposed tariffs
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were not to exceed. There are to be five rounds of bidding according to the program
(Baker, 2012) (Montmasson et al. 2014).
By close of the end of the first competitive bidding process in November, 2011
out of 53 bids for 2,128 MW of power generating capacity received, 28 preferred
bidders representing 1,416 MW for a total investment of close to US$ 6 billion were
selected (Eberhard et al. 2014). In the second round of bidding, the total amount of
power to be acquired was reduced, and competition was increased by tightening the
procurement process. Prices were more competitive, and bidders offered better local
content terms (Eberhard et al. 2014). The third round of bidding commenced in 2013
with the total capacity again restricted. Prices fell further, and local content increased
further in the third round of bidding. There were 13 successful bids in the fourth round
across all technologies, totaling 1,121MW of new capacity (Wills, 2015). In all, the
REIPP program has approved 64 projects of which 47 have already achieved financial
closure resulting in nearly 4,000 MW of renewable generation capacity (mainly wind
and solar power) in less than two and a half years with power purchase agreement
being signed between IPPs and Eskom25 for all these 4,000 MW capacity. As of the
end of 2014, a total of about 1.6 GW of installed renewable capacity (600 MW wind
and 1,000 MW Solar) had been commissioned and fed energy into the grid (Eberhard,
et al. 2014). A key factor contributing to the success achieved by the South African
25 Eskom is South Africa’s state-owned power company, and is also the off-
taker/buyer of power from IPPs in the country.
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renewable energy experiment is that the REIPPPP benefited tremendously from high-
level political support.
The increased deployment of renewables in South Africa is beneficial to the
country in terms of its environmental and socioeconomic needs. The deployed
renewables so far have helped in balancing between competing government objectives
regarding energy; in terms of affordability, reducing carbon emissions (towards a green
economy), water conservation, localization and, national economic development.
One important and useful strategy yet quite controversial aspect 26 of the Renewable
Energy IPP Procurement Program is the requirement and strong reliance on non-price
factors including local content requirements in the evaluation of bids (Eberhard et al.
2014). These non-price factors are captioned in the bid documents under the heading of
“economic development requirements” (EDRs). The EDRs incentivize bidders to
promote job growth and domestic industrialization of the renewable energy industry
and to get local community involvement for the benefit of the communities. One other
benefit of the EDRs is what is referred to as “black economic empowerment (BEE)”
which emphasizes “black jobs creation” and the development of local communities.
26 According to Eberhard, et al. (2014), the non-price “requirements were controversial
for several reasons: many international bidders felt that these factors were too
demanding and played too substantial a role in bid valuation, while domestic
participants, backed by South African trade unions, thought the requirements were not
demanding enough” (Eberhard, et al. 2014 pp. 24).
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2.6.2 Kenya
The main policies of the Kenya energy sector include the Least Cost Power
Development Plan (LCPDP), Rural Electrification Master Plan, Sessional Paper No. 4
of 2004 (The energy policy document), the Energy Act of 2006, the Feed-in Tariff
(FIT) Policy, the Kenya National Climate Change Response Strategy, and the Kenya
Vision 2030 (the National economic development blueprint). To meet the increased
electricity demand, a target was set to build new capacities of 5,110 MW from
geothermal, 1,039 MW from hydro, 2,036 MW from wind, 3,615 MW from thermal,
2,420 MW from coal and 3,000 MW from other sources, and also to bring in 2,000
MW from imports.
Considered as one of the pioneers of feed-in tariff on the African continent
Kenya’s motivations for pursuing renewable energy policies is to promote the
deployment of renewables, to increase power production in general and also to
promote smaller electricity projects (Renewable Energy Ventures , 2013). Kenya’s FIT
policy was enacted in 2008 to cover wind, hydropower and bioenergy generated
electricity. A re-enactment of the policy in 2010 was necessitated by criticisms of the
government’s approach favoring state-led investments in large scale projects. The 2010
version of the FIT included geothermal, solar and biogas generated electricity with
tariffs applying to grid-connected plants to be valid for a 20 year period from the
beginning of a Power Purchase Agreement (PPA). Kenya’s PPAs links power
producers to grid system after the generator has obtained prior approval from the
country’s Energy Regulatory Commission. Kenya’s FIT distinguishes between firm
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and non-firm tariffs. Firm tariffs require a fixed amount of generation or a must-
generate agreed upon upfront between the generator IPP and country’s utility. The FIT
for firms allows for more planning certainty for the utility and also a higher tariff for
the IPP compared to the non-firm tariff FIT, which requires no prior fixed must-
generate clause in the PPA. However all tariffs whether firm or non-firm has one
common un-exceedable maximum tariff ceiling.
Kenya has mandated solar thermal systems (STS) in large buildings. The
country has also created STS local manufacturing capability and put in place
internationally-based national STS standards and a certification scheme. Technical
capacity is also being built through licensing for trained installers and inspectors of
STSs to ensure enhanced system performance (Climate Innovation Center).
In Kenya, environmental benefits in terms of reductions in emissions of local
and regional pollutants have resulted from the substitution of conventional energy
sources with renewables. Socioeconomically, this has led to improved human and
ecological health at the household level (Malla, et al. 2011).
2.6.3 Mauritius
Mauritius has over 99% of its population of about 1.3 million connected to the
grid. Electricity generation from sugar cane bagasse accounts for about 18% total
power generation. The country predominantly depended on imported coal and oil for
power generation. A strong political will from the government of Mauritius for
sustainable development and decentralized power production is one of the motivations
for the country’s renewable energy efforts. The government’s efforts aimed at partial
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energy autonomy from imported fossil fuels, significantly increasing the share of
renewables as well as improved energy efficiency. Renewable energy and efficiency
efforts are funded in Mauritius through the “Maurice Ile Durable” (MID, Sustainable
Island Mauritius). The program is funded through a carbon tax. Taxing carbon
underpins the government’s commitment to moving away from fossil fuels and
towards renewable sources of energy. The orientation of Mauritius renewable energy
agenda is not to look for profitable projects in the form of large projects as is the case
with most existing renewable policy implementation schemes on the African continent.
Rather the focus is towards national, small and household level producers who are
grid-connected and incentivized by the country’s FIT scheme. Tariffs are therefore
calculated based on actual cost of household installations, at moderate return on
investment with larger installations receiving lower tariffs (Renewable Energy
Ventures , 2013).
2.6.4 Summary Lessons on Country Case Studies
The review on sample developing countries in Africa shows that different types
of policies including price and quantity setting instruments have been implemented to
promote the development of renewable energy technologies on the African continent.
In a couple of the sample countries, the feed-in tariff (FITs) have undergone
adjustments over time and this points to an important policy design lesson. That,
designing the right policy in a right way from the onset is important. Another lesson is
to insert policy adjustment mechanisms (such as reviews, threshold adjustments, and
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adjustments that affect future projects) to allow for flexibility in managing future risks
or necessary changes.
As can be observed in the cases of the countries reviewed, a number of
developing countries in Africa have set goals for sustainable energy development.
Some countries have ambitious targets whiles others do not. Some of the countries
with ambitions sustainable energy goals, renewable energy targets and policy
statements are yet to extensively design, synchronize, and execute their policies to
promote renewable energy technologies. From the country cases reviewed, the
following are identified as contributing to achieving success in implementation of
renewables deployment on the continent:
having a long-term national renewable energy policy with differentiated details
(such as technology set asides);
real and unwaving political commitment (from national governments and other
stakeholders);
real financial commitment (such as the provision of renewables development
funds and/or attracting invesments); and
putting in place measures that mitigate risk to developers and investors.
The avoiding of counterproductive instruments such as policies and plans that promote
conventional, dirty energy practices gives credence to commitment to renewables and
attracts IPPs. The diversity in renewable energy policy-choices from the country case
reviews illustrate that renewable energy deployment and deployment decision making
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should not necessary be a one size fit all. Countries should adopt suitable renewable
energy policies and other efforts that best meet their particular circumstances. Also,
countries can resort to the adaptive learning approach of learning - by doing through
making changes to policies where and when deemed necessary towards sustainable
implementation.
On this note, the country case studies suggest that it is important for Ghana to
make policy choices of renewable energy instruments, design, and policy intricacies
that are tailored to the country’s existing conditions and energy systems. In this way
such policy-choices would suit the country’s energy market; supply or demand
situations. Also, it is important for the country to have clearly stated renewable energy
polices. The putting in place of pragmatic implementation strategies would be key for
the country to realize its renewable energy policies. Strong political will and
commitment (irrespective of which political party is in ruling the country) would also
be needed.
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Chapter 3
ENERGY IN THE GHANAIAN CONTEXT
3.1 Demography and Population
The Republic of Ghana is a country in sub-Sahara Africa located along the west
coast of the African continent. The country lies between latitude 4.5oN and 11.5oN and
longitude 3.5oW and 1.3oE as shown in Figure 3.1. Ghana is bordered on the south by
the Atlantic Ocean, on the east by Togo, on the west by La Cote d'Ivoire and the north
by Burkina Faso. The country has a land area of 239,460 km2 and is divided into ten
administrative regions as shown in Figure 3.1.
Typical of most developing countries in Africa, Ghana’s population has been
on the increase. The country’s population in the year 2000 was 18.9 million;
representing an increase of about 54% over the population in 1984 (which was about
12.3 million). In 2012, the population was estimated to be 25.87 million with an annual
growth rate of 2.4%; a growing rate that is comparable to that for the entire sub-Sahara
African region - 2.5% (Government of Ghana, 2015a). The population is projected to
reach 49 million by 2040 (Ghana's EPA, 2015a). Ghana’s population is largely urban
(56.2%) with an urban growth rate of 4.2% (meaning the rural population is 43.8%)
(Ghana's EPA, 2015a).
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Figure 3.1: Map of Ghana
3.2 Climatic Conditions
Climate-wise, Ghana has six agro-ecological zones. From the northern part of
the country to the southern, these zones are the; Sudan Savannah Zone, Guinea
Savannah Zone, Transition Zone, Semi-deciduous Forest zone, Rain Forest Zone and
the Coastal Savannah Zone (KITE, 2008). Typical of a country in a low latitude
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position and without high-altitude areas, temperatures throughout the country are high
with an annual mean above 24oC. From the southern to the northern regions,
temperatures usually range between 18oC and 40oC.
The northern part of Ghana experiences a single rainy season annually. The
peak of the rainy season in the parts of the north is between July and September with
rainfall amounts ranging between 150 – 250 mm per month. The southern regions of
the country experience two wet seasons; the major season from March to July and the
minor one from September to November (Owusu & Waylen, 2013). The rainfall
seasons in Ghana are controlled by the movement of the tropical rain belt known as the
Inter-Tropical Convergence Zone (ITCZ). The ITCZ swings back and forth between
the northern and southern tropics each year. The northern and southern passage of the
ITCZ correspond to the rainy seasons in the country. Prevailing wind direction in areas
to the south of the ITCZ is southwesterly, which blows moist air from the Atlantic
Ocean onto the continent. Prevailing winds to the north of the ITCZ are from the
northeast bringing hot and dusty air from the Sahara desert between December and
March each year. These Northeast winds (from the Sahara desert) is also known as
Harmattan. A shift in these two prevailing winds, (the southwesterly and the
Harmattan) occurs when the ITCZ moves southward and northward across the country
and this pattern is known as the West African Monsoon (Nkrumah, et al., 2014).
Studies have shown that the annual rainfall in Ghana is highly variable in interannual
and inter-decadal time scales. This variability is due to changes in the intensity and
movement of the ITCZ resulting in variation in the seasonal weather pattern. Rainfall
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amounts are known to have decreased over the period 1960 to 2008. With the decrease
being an average of 2.3 mm per month (2.4%) per decade (McSweeney et al., 2010)
(Owusu and Waylen, 2009).
3.3 Energy, Water, and Climate Change
Water, energy, and climate change; these are intimately linked. They all impact
on ecosystems, economies, livelihoods as well as culture values of societies, whether
developed, developing or underdeveloped. Water is used to obtain energy (primary as
well as secondary forms of energy), and energy is required for providing (collecting,
treating and distributing) water (Gleick, 1994) (Siddiqi & Anadon, 2011). Water and
energy are obtained or derived from the ecological system, and the processes involved
can adversely impact ecosystems in ways such as loss of habitat, pollution, and other
changes in ecological systems. For instance, fish spawning can be adversely impacted
by dams on rivers for hydropower generation (Torcellini et al., 2003). Because of this
inextricable link, a problem with energy most likely results in a water issue and an
issue with water is most liable to impact energy production. Climate change most often
affects water and energy among other things. Conversely, so also are solutions. For
instance sustainable energy implementation usually sustainably impacts on water and
the climate (WBCSD, 2009). Most regions in the world, including the sub-Sahara
African region have already started experiencing adverse effects of climate change on
their water and/or energy resources (Dahou et al., 2012), and such is the case for
Ghana.
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3.3.1 Energy and Climate Change
Ghana’s total greenhouse gas (GHG) emission in 2012 was 33.66 million tons
(Mt) of carbon dioxide equivalent (CO2-e) as shown in Table 3.1 below. Total GHG
emission from sources excluding AFOLU (Agriculture, Forestry and Other Land Use)
was estimated to be 18.49 MtCO2e. As shown in Table 3.1 below, total GHG
emissions have been on the increase over the years.
Table 3.1: Ghana’s Total Greenhouse Gas Emissions by Sectors.
Source: Ghana’s Third National Communication to the UNFCCC Report
(Government of Ghana, 2015a).
Sectors & Sub-
sectors
Emissions MtCO2e Percent Change
1990 2000 2010 2011 2012 1990-
2012
2000-
2012
2010-
2012
All Energy
(combustion &
fugitive)
3.5 5.54 11.27 11.63 13.51 286.08 143.65 19.79
Stationery energy
combustion 2.03 2.73 6.48 6.22 7.05 247.28 158.1 0.09
Transport 1.47 2.81 4.8 5.41 6.46 339.66 129.85 34.67
Fugitive emission 0 0.003 0.001 0.001 0.002 284.71 -51.74 139.35
Industrial Process
& Product Use 0.81 0.77 0.24 0.44 0.47 -42.47 -39.56 94.24
AFOLU 8.61 7.72 14.67 14.08 15.17 76.28 96.65 3.46
Livestock 1.72 2.2 2.82 2.8 3.05 77.29 38.66 8.01
Land -3.02 -4 1.85 1.31 1.84 -160.7 -145.9 -0.96
Aggregated and
Non-CO2
emissions
9.91 9.52 9.99 9.98 10.29 3.83 8.08 3
Waste 1.31 2.29 4.24 4.45 4.52 245.97 97.03 6.54
Total emissions
(excluding
AFOLU)
5.61 8.61 15.75 16.51 18.49 229.31 114.81 17.36
Total net
emissions
(including
AFOLU)
14.22 16.32 30.42 30.6 33.66 136.69 106.22 10.66
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The 2012 total emissions reflects 10.66% increase over that for 2010 and 106.22%
increase over that for the year 2000.
Emission from Agriculture, Forestry and Other Land Use (AFOLU) sources
was the largest in 2012, accounting for 15.2 MtCO2e (representing 45.1%) of the total
GHG emissions for the year. This was followed by emissions from all energy sources;
13.51CO2e - representing 40.1% of total emissions. In the same year (2012), carbon
dioxide (CO2) emissions were 14.81 Mt (i.e. 44% of total emissions), constituting the
dominant GHG emitted in the country. Nitrous oxide constituted 30.8% and Methane
24.8%. Perfluorocarbons (PFCs) (0.11 MtCO2e) constituted the remaining 0.3% (see
Figure 3.2 below).
Figure 3.2: Contribution of Gases to Ghana's Total National Emission in 2012.
Source: Ghana’s First Biennial Update Report (Ghana's EPA, 2015b).
Carbon Dioxide 44.0%
Methane24.8%
Nitrous Oxide30.8%
PFC0.3%
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Of the total net of 14.81 CO2 emitted in 2012, 12.59 Mt (representing 85% of total CO2
emissions) was from the energy sector. For the energy sector, CO2 emissions
accounted for the largest share of gases (93% of total emissions) of which electricity
generation and transport were the key sources (Ghana's EPA, 2015b).
Results from various studies on the country’s climate vary enormously.
However, these existing studies indicated clear signs of change in terms of warming as
an increase of 1oC has been observed over the last 30 years. This observation is a
strong indication that the country is vulnerability to the effects of climate change. A
recent model on of the country’s climate projects a temperature rise of 1.7oC to 2.04oC
by 2030 in the northern savannah regions. Such changes in temperature are expected to
cause extreme weather events including more severe dry winds, excessive heat as well
as high torrential rains in the country (SNC, 2011).
Climate change mitigation plans and adaptation strategies in Ghana are set forth
in the country’s National Climate Change Policy Framework (NCCPF). The objectives
of the NCCPF include the following: a) to obtain a low carbon growth; b) to implement
adequate adaptation measures to climate change; and c) to bring about sustainable
social development. The objective of economic growth driven by low carbon emission
options is line with the tenets of sustainable development. This study is therefore of the
view that substantially increasing the proportion of renewables in Ghana’s electricity
generation mix would be an excellent path the contributes to achieving the main
objectives of the NCCPF.
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3.3.2 Water for Electricity
Ghana has extensive water bodies. Freshwater covers about 5% (11,800km2) of
the country’s total land area. This area includes the Volta River basin; which has Lake
Volta and Lake Bosomtwe (which together occupy about 3,275m2 of the total area of
the country). The country’s renewable internal freshwater is estimated at 30.3 billion
m3 with a declining per capital of 1,935.4 cm3 in 1992 and 1,213.7 cm3 in 2011. Of
these, hydroelectric power generation requires about 37,843 million m3/year and an
average of 0.982 billion m3 is withdrawn annually to support economic activities. The
main economic uses of freshwater in the country include the following; agriculture –
livestock watering and irrigation (requiring 66.4% of total withdrawal), industry
(9.67% of total withdrawal), and domestic (23.93% of total withdrawal). Ghana’s
Third National Communication to the UNFCCC Report (Ghana's EPA, 2015a) noted
that the country’s freshwater resources are at risk because a number of reasons
including the following: a) inappropriate management, b) high rates of logging, c) fuel
wood extraction, d) surface mining, e) poor agriculture practices, f) desertification, and
g) negative impacts of climate variability and change.
The country’s hydroelectric power generation are stationed at Akosombo
(1,020 MW), Kpong (160 MW) and Bui (400 MW). In the years 1983-4, 1997-98,
2003, 2006-2007 and 2012-2013, the country experienced serious electric power
shortages as a result of droughts. These shortages resulted in power rationing in the
country, with the 2012-2013 power rationing being the severest (Energy Commission,
Ghana, 2015). The electric power crisis of 2006-2007 is estimated to have cost the
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country nearly 1% in lost growth of gross domestic product during that period. (Bekoe
& Logah, 2013). Many studies including WRI-CSIR (2010) and Andah et al. (2004) all
indicate evidence of climate change effects on Ghana’s water resources. Less rainfall
is one of such impacts, and it is certainly adversely affecting hydropower generation in
the country. Another climate change impact projected for Ghana is higher levels of
precipitation. Such higher levels of rainfall in the country would pose structural
challenges to the hydroelectric power dams - putting hydropower generation at risk
(Bekoe & Logah, 2013). Higher levels of precipitation are also expected to adversely
affect livelihoods, and pose great existential risks as a result of flooding.
Thermoelectric power generation takes up much water for producing the
primary fuels and for thermoelectric cooling. Adding more thermoelectric power to the
national generation mix would mean increased water demand for thermoelectric
cooling, and this might pose difficulties for water planners. Unmet significant water
requirements for thermoelectric power generation in the future would compound the
challenges posed by rolling blackouts experienced in the country in the recent past –
including lost in national socioeconomic development.
3.4 Energy and Development
Energy is critical for fueling economic development and growth in Ghana.
Modern energy services – especially electricity – is needed in the country to enable the
running of existing businesses and for new companies to create jobs. Also, modern
energy services are required to improve the country’s health and education systems and
to reduce labor needed for cooking and meeting other fundamental human needs.
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Ghana’s quest for economic growth into the future comes with the task of
increasing the country’s inadequate electricity generation capacity to meet demand for
electricity. As a commercial producer of crude oil since 2010, the country is currently
developing its natural gas production potential to ensure a reliable domestic supply of
natural gas for power generation into the future. The aim is to reduce the dependence
on natural gas from Nigeria - which has proven unreliable in the past. Ghana is also
naturally endowed with renewable energy sources, and there are some national plans to
embark on a low-carbon developmental path through renewable electricity.
According to a discussion paper titled “Ghana Goes for Green Growth”
published in 2010 by the Government of Ghana, the country’s energy opportunities in
oil and gas and renewable energy resources (solar, wind tidal power, mini-hydro and
bio-power) puts the country’s development path at a crossroad as these sources of
energy offer a couple of different energy development pathways. Among these, the
option of a low carbon growth path for Ghana seeks to promote economic development
while keeping emissions low (Government of Ghana, 2010) (SNC, 2011).
This low carbon development path was embodied in Ghana’s long-term
sustainable development plans and priorities towards the country’s attainment of a
middle-income status. These plans and priorities included; a) establishing a sound built
and natural environment that sustains productive economic activities and living
conditions for both present and future generations, and b) establishing an
environmentally conscious society that exercises self-discipline with respect to
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individual and community environmental activities (Ankomah Asante, Essel, & Addai
Aidoo, 2010).
3.5 Regional Energy Context
The need for African countries to boost-up their renewables deployment
beyond rural development towards macro sustainable socioeconomic development has
been suggested by a number of studies (IRENA 2013; 2014), (Brew-Hammond 2008).
In recent years, there has been some rapid responses to these suggestions at the
regional and national levels on the African continent.
At the regional level, there exist four regional power pools in sub-Sahara
Africa. These are the West, Central, Eastern and Southern Africa Power Pools. These
power pools provide some forms of structure for the development of the sub-Saharan
African power markets towards sustainable power supply and access. The West
African Economic and Monetary Union also known as UEMOA (from its name in
French) of which Ghana is a part, established the Regional Initiative for Sustainable
Energy (RISE) 2009‐2020. The RISE targets universal access by 2030 and to increase
the West African regional renewable energy share from 36% in 2007 to 82% by 2030.
The South African Power Pool Plan of 2009 has a target of 57,000 MW of additional
installed renewable capacity by 2025 at an estimated USD 89 billion investment
(Müller, et al., 2011). These regional targets are partly responsible for spurring on
countries within these sub-regions in Africa to pursue national renewable energy
projects and programs backed with national policies.
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Presently, ECOWAS27 (Economic Community of West African States) is one
of Africa’s sub-regions with very low per capita electricity use. However, this situation
is expected to change in the future as electricity demand in most parts of the sub-region
is projected to increase by ten-fold in the coming two decades due to increasing
economic activities and national efforts towards attainment of universal access
(VILAR, 2012). One of the greatest needs therefore of the region is sustainable energy
for sustainable development. To surmount these energy and development related
challenges in the West Africa sub-region, the following efforts were made;
a) ECOWAS in 1982 proposed a natural gas pipeline across West Africa. This
proposal led to the heads of states of Benin, Ghana, Nigeria and Togo signing
the West African Gas Pipeline (WAGP) treaty in 2003. The goal of the treaty is
to transport natural gas from Nigeria to Benin, Togo and Ghana for the use of
power plants and heat using industries;
b) ECOWAS Energy Ministers initiated a West Africa Power Pool (WAPP). The
mandate of the WAPP is to promote the development of electric power
generation and transmission and to coordinate electric power trade among the
ECOWAS Member States;
27 The ECOWAS region is made up of 15 member states, namely; Benin, Burkina
Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea Bissau, Liberia,
Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo.
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c) The ECOWAS Regional Center for Renewable Energy and Energy Efficiency
(ECREEE) was established in 2010 to spur efforts at mainstreaming renewable
energy in the national energy policies of ECOWAS member countries.
The West African Gas Pipeline (WAGP) project consists of a 681 km gas
pipeline of which 56 km of 30” pipeline is from Itoki to Lagos beach in Nigeria; 569
km of 20” is offshore pipeline from Lagos to Takoradi in Ghana. The gas delivery
points are in Cotonou in Benin, Lome in Togo, Tema, and Takoradi, in Ghana (see
Figure 3.3 below). The WAGP was commissioned in 2008 and has a maximum
capacity of 474 MMscf/day. The West Africa Pipeline Company (WAPCo) - the entity
that oversees the WAGP project is a multinational company owned by Chevron West
African Gas Pipeline Ltd (36.7%), Nigerian National Petroleum Corporation (25%),
Figure 3.3: WAGP Pipelines.
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Source: (Magbonde, 2007)
Shell Overseas Holdings Limited (18%), Takoradi Power Company Limited (16.3%),
Société Togolaise de Gaz (2%) and Société BenGaz S.A. (2%) (WAGPA, 2013). The
West African Gas Pipeline Authority is the regulatory body for the WAGP. The first
“free flow” of natural gas supply through WAGP arrived in Ghana in 2008. Ghana’s
Volta River Authority began power generation with natural gas from WAGP in 2009.
Damage to the West African Gas Pipeline in August 2012 in offshore Lome (Togo)
resulted in gas flow shut down by the West African Gas Pipeline Company Limited
(WAPCo). This affected deliveries to Benin, Ghana and Togo. The shortage of the
flow of gas adversely affected power generation in Ghana. However, gas deliveries
resumed in July 2013.
The West Africa Power Pool (WAPP)’s objective is to provide a reliable and
competitively priced long-term supply of energy across the ECOWAS sub-region. To
do this, WAPP’s plans to develop regional electricity in successive phases. Actions
planned towards a regional electricity market include the completion of regional
transmission infrastructure, the formalization of trade arrangements and the negotiation
of transmission pricing as well as the formulation and enforcement of regional
regulations. The long-term objective of WAPP towards a regional electricity market
includes optimization of the region’s transmission operation. WAPP’s master plan is
organized around 30 generation and 26 transmission priority projects in the ECOWAS
sub-region. The objective includes adding 10% renewable energy (excluding large
hydro) to the regional electricity fuel mix. The master plan also includes adding 16,000
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km of transmission lines and 10,000 MW of installed capacity of which 7,000 MW
will be from hydro sources by 2025. Work on a 60 MW Felou hydropower facility and
a 9.6 million Euro project linking Côte d'Ivoire with Liberia is expected to be
completed in 2017. The commissioning of the Ghana component of the 330-KV
Ghana-Togo interconnection project was expected in 2015 (ECOWAS, 2013) (WAPP,
2013).
An analysis of the ECOWAS power pool by Gielen et al. (2012) projects power
supply to grow from 51 TWh in 2010 to 247 TWh in 2030 (a five-fold increase) and
to 600 TWh in 2050 (a twelvefold increase). Gielen et al. (2012) also suggested that
the fossil power generation mix in 2030 would include 94 TWh of gas and 18 TWh of
coal and up to 54% of the total electricity could be from renewables (by 2030).
The establishment of the ECOWAS Center for Renewable Energy and Energy
Efficiency (ECREEE) led to the creation and adoption of an ECOWAS Renewable
Energy Policy (EREP) in November 2012. The aim of the EREP is to improve energy
security and sustainable supply of electric power. The ECREEE also aims at reducing
the dependence on imported fossil fuels and to promoting access to energy services in
rural and urban areas. The goal of the EREP also includes creating a conducive
environment that attracts private investments in the energy sector and to promote the
use of renewables as an engine for industrial, social and economic development in the
ECOWAS region (EREP, 2012). Significant achievements of the ECREEE to-date
include the following:
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1. The approval of 41 projects with an overall volume of 2 million EUR through
its first call for proposals for the ECOWAS Renewable Energy Facility
(EREF);
2. the establishment of a web-based “ECOWAS Observatory for Renewable
Energy and Energy Efficiency” (ECOWREX), which provides targeted
investment and business information on energy resources (especially in the
areas of renewable energy and energy efficiency); including resources, policies,
projects and power plants for private and public sectors; and
3. the commencement of the ECOWAS Renewable Energy Investment Initiative
(EREI) which aims at mitigating financial barriers to investments in medium
and large-scale renewable energy projects and businesses in the ECOWAS
region.
Ghana’s vision for an “Energy Economy” is rooted in the context of regional
cooperation under the ECOWAS. The country’s vision for an “Energy Economy”
includes the “Ghana Goes for Green Growth” agenda. This agenda aims to drive the
national economy by increasing trade in the energy sector through electricity exports to
the ECOWAS sub-region. Towards this goal, Ghana has maintained energy trading
relations with its neighbors; including export of electricity to Togo, Cote d’Ivoire and
Benin and the import of electricity from Cote d’Ivoire. To further achieve the vision of
an “Energy Economy,” Ghana is positioning itself as a major player in the regional
energy market by strengthening and extending existing transmissions interconnections
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to its neighboring countries. This expansion efforts include; the new 330kV
interconnection between the Volta Region (eastern part of Ghana) and Togo, and a new
interconnection with Burkina Faso from Bolgatanga in the Upper West Region of
Ghana (a 225 kV transmission line project was expected in 2014). Other transmission
expansion plans included a new 225 kV interconnection from Bolgatanga in Ghana to
Mali via Burkina Faso in 2015 (WAPP, 2013). The country also envisions that by
2020, a new 225 kV interconnection with the grid in Cote d’Ivoire through Prestea in
the Western Region of Ghana would be accomplished.
3.6 Ghana’s Energy Overview
3.6.1 Demand and Supply
In the year 2014, Ghana’s primary energy supply was from four main sources;
oil 46% (4,4177ktoe), natural gas 7% (621ktoe), hydro 8% (721ktoe), and biomass
40% (3,628ktoe) (Energy Commission of Ghana, 2015). In order to reverse the effects
of dependency on wood-fuels, such as deforestation, the country’s plan has been to
replace wood fuels over time with secure and reliable supply of high-quality energy
services for all sectors of the Ghanaian economy and to provide access to modern
energy for all by 2020. The country’s energy indicators over recent years all show
increasing trends (see Table 3.2 below). These increasing trends are expected to
continue into the future as the country’s population continues to grow and as the
country’s economy continues to expand.
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Table 3.2: Ghana's Energy Indicators (1990-2012)
NB: TPES stands for Total Primary Energy Supply.
Source: (Ghana's EPA, 2015a)
Ghana has recorded net electricity import over recent years as shown below in
Table 3.3. The main drivers of electricity consumption in Ghana include aluminum
Indicators
Year
1990
Year
2000
Year
2006
Year
2010
Year
2012
Change
1990-
2012 (%)
Change
2010-
2012
(%)
Population (million)
14.43
18.91
21.88
24.23
25.87
79.3
6.8
GDP (Constant 2006
USD billion)
5.51 8.39 20.33 16.95 16.78 204.5 -1
TPES (Mtoe 5.29 7.74 9.06 9.32 11.77 122.49 26.29
Final Consumption
(Mtoe)
4.31 5.41 6.01 6.46 8.16 89.33 26.32
Total Electricity
Generated (GWh)
5,721 7,223 8,430 10,167 12,024 110 18
of which is
Hydroelectric (GWh)
5,721 6,609 5,619 6,996 8,071 41 15
of which is Oil
Products (GWh)
0 614 2,811 3,171 3,953 0 25
Total Electricity
Consumed (GWh)
4,462 6,067 7,362 8,317 9,258 107 11
GDP per capita
(Current USD
thousand)
0.4 0.26 0.93 1.33 1.6 300 20.3
TPES per capita (toe) 0.37 0.41 0.41 0.38 0.45 21.62 18.42
Final Consumption
per capita (toe)
0.30 0.29 0.27 0.26 0.31 3.33 19.2
GHG emissions per
capita (t CO2 e)
0.39 0.45 0.57 0.64 0.71 82.05 10.9
GHG emissions per
GDP unit (kg CO2e
/2005 USD)
1.02 1.03 1.09 1.06 1.00 -1.9 –6.2
Energy Intensity
(toe/2005 GDP)
0.96 0.92 0.45 0.55 0.70 -26.9 27.7
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production by VALCO28 and mining operations in the country. The growing share of
electricity consumption from other industrial sectors in the country is significant as
these other sectors also keep expanding.
Table 3.3: Electricity Import, Export, and Net Import from 2005 – 2014 (in GWh).
Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Import 815 629 435 275 198 106 81 128 27 51
Export 639 754 246 538 752 1,036 691 667 530 522
Net Import 176 -125 189 -263 -554 -930 -610 -539 -503 -471
Negative net import means net import.
Source: National Energy Statistics (Ghana Energy Commission 2015).
The country’s on-going national electrification scheme and the natural or organic
economic expansion as well as increasing petroleum activities (both upstream and mid-
stream) are the main specific factors contributing to the country’s recent growing
demand for electricity (Energy Commission, 2013).
28 Volta Aluminum Company, known as VALCO, is an aluminum company based in
Ghana founded by Kaiser Aluminum and now wholly owned by the government of
Ghana. VALCO is current operated as a joint venture with Alcoa - a major aluminum
conglomerate based in the United States.
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Table 3.4: Installed Electricity Generation Capacity as of December 2014
Generation Plant
Fuel
Type
Installed
Capacity,
(MW)
%
Share
Average
Dependable
(MW)
Average
Available
(MW)
Hydro Power Plants
Akosombo Hydro 1,020
55.8
900 743
Kpong Hydro 160 380 84
Bui Hydro 400 140 130
Sub-total
1,580 1,420
956
Thermal Power Plants
Takoradi Power
Company
(TAPCO) Oil/NG 330
44.1
300
102
Takoradi
International
Company (TICO) Oil/NG 220 200
82
Takoradi – 3 (T3) NG 132 125 10
Sunon-Asogli
Power (SAPP) NG 200 180
144
Tema Thermal
Plant 1 (TT1PP) Oil/NG 110 100
80
Mines Reserve
Plant (MRP) Oil/NG 80 70
22
Tema Thermal
Plant (TT2PP) Oil/NG 50 45
26
CENIT Energy Ltd
(CEL) Oil/NG 126 110
58
Sub-total
1,248 1,130
521
Renewable
VRA Solar 2.5 0.1 2.0 1.0
Total 2,830.5
12
1,482
NG is Natural Gas
Source: (Energy Commission, Ghana, 2015).
Electricity demand in the country is reported to the growing at a rate of about 10% per
annum. Total installed electricity generation capacity as at the end of December 2014
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was 2,831 MW with hydropower capacity constituting 55.8 % of total generation
capacity and thermal capacity 44.2 % (see Table 3.4 above).
Current hydropower generation capacity is from three hydro dams at
Akosombo, Kpong and Bui hydropower stations. Thermal capacity sources of power
generation included the Takoradi Power Company (TAPCO), Takoradi International
Company (TICO), Sunon-Asogli Power (SAPP), Tema Thermal Plant 1 (TT1P), Mines
Reserve Plant (MRP), Tema Thermal Plant (TT2P), and CENIT Energy Ltd (CEL).
These installed sources and their capacities are detailed in Table 3.4 above.
3.6.2 Power Sector, Key Stakeholders, and Institutional Arrangements
The key stakeholders in Ghana’s energy sector include the sector Ministries for
Power and Petroleum, the Volta River Authority (VRA), Independent Power Producers
(IPP), the Northern Electricity Distribution Company (NEDCo), the Ghana Grid
Company Limited (GRIDCo), and bulk customers (like the mines). Other key
stakeholders include residential, industrial and commercial customers, the Public
Utilities Regulatory Commission (PURC) and the Energy Commission (EC). The
structure of the country’s power sector is depicted below in Figure 3.4.
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Figure 3.4: Ghana's Power Sector Structure
Ghana’s power sector regulation-setup consists of the following bodies; the
sector Ministry of Power, the Energy Commission (EC), and the Public Utilities and
Regulatory Commission (PURC). The EC and the PURC oversee licensing and tariff
setting respectively. In additional to its role as a technical regulator of the power
sector, the Energy Commission of Ghana advises the Minister of Energy of Ghana on
energy planning and policy issues. The Energy Commission Act of 1997 (Act 541)
introduced a new structure for the power market, permitting private sector investment
in power generation. Act 541 allowed for non-discriminatory transmission services to
enhance competition in the power generation sector of the country. The Public Utilities
Regulatory Commission Act of 1997 (Act 538) established PURC’s authority to set
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electricity tariffs in the country. Regulation mandates of the PURC therefore, include
providing guidelines on rates chargeable for electricity services as well as examining
and approving rates. The PURC is also in charge of protecting the interests of power
consumers and providers of utility services in the country. One way the PURC does
this is through the monitoring of standards of performance of utilities and promotion of
fair competition in the country’s energy market.
The main electric power generators in Ghana are the Volta River Authority
(VRA), the Bui Power Authority (BPA) and independent power producers (IPPs). The
VRA and BPA are state-owned and operated. The VRA undertakes electricity
generation operations through the Akosombo hydropower station, Kpong Hydropower
station and the Takoradi Thermal power plant (TAPCO) at Aboadze.
The Volta River Authority (VRA), has a construction permit to construct a 220 MW
Kpone Thermal Power Project in Tema. A number of provisional wholesale electricity
supply licenses have been issued to potential Independent Power Producers (Energy
Commission, 2013). The BPA undertakes generation of power through the Bui
hydropower station.
The VRA was the state utility responsible for the generation, transmission and
distribution of electricity throughout the country until 2008. To make the power sector
more efficient and also to open up the sector for private participation, the Government
of Ghana undertook a reformation and restructuration of the country’s power sector.
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This led to the unbundling of VRA from a generator, buyer and seller of electric power
to just a generator.29
There are a number of independent power producers (IPPs) generating electric
power or currently at various stages of development. These include a 200 MW from
the Sunon Asogli Plant and 126MW from Tema Osonor Power Plant (now CENIT
Energy Limited). Cenpower Generation Company is reported to be preparing to begin
construction and expected to add a capacity of 300 MW to the country’s generation
capacity.
The Ghana Grid Company (GRIDCo) was established under the Energy
Commission Act of 1997 and the Volta River Development (Amendment) Act of 2005.
It is a private limited liability company that is wholly owned by the Government of
Ghana. GRIDCo has the responsible to undertake economic dispatch and transmission
of electricity from the generating companies to bulk customers (distributors and bulk
consumers). These bulk customers include the Electricity Company of Ghana (ECG),
Northern Electricity Distribution Company (NEDCo) and bulk customers like VALCO
and the mining companies. GRIDCo, therefore, has the mandate to provide open access
to the transmission grid for all participants in the power market towards efficient power
delivery in the country.
29 The unbundling of VRA’s responsibilities as the producer and buyer of electricity,
as well as operator of the transmission system opened up the power market in Ghana to
competition, development and growth (Tomkins, 2003).
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The Ghana Grid Company Limited (GRIDCo) owns and operates over 4,000
km of transmission lines operating at various voltages; including 330 kilovolts (kV),
225kV and 161kV across the country. These lines carry power from different
generating stations to fifty-one (51) operational transformer substations with some of
its new substations at different stages of construction. GRIDCo, therefore, has the
mandate to provide open access to the transmission grid for all participants in the
power market towards efficient power delivery in the country. Power is stepped down
at these substations to lower voltages to 34.5 kV, and 11kV for its major bulk
customers and the Electricity Company of Ghana (ECG) and Northern Electricity
Company (NEDCo).
Distribution of electricity in Ghana is by the Electricity Company of Ghana
(ECG) and the Northern Electricity Distribution Company (NEDCo). Various projects
are being carried out by GRIDCo towards upgrading and further expansion of the
country’s electricity grid. These projects are aimed towards improving the quality of
distribution services undertaken by the Electricity Company of Ghana (ECG) and the
Northern Electricity Distribution Company (NEDCo). These improvements are
expected to result in further increase in electric demand from domestic customers.
3.6.3 Energy Sector Development Partners
Ghana has a number of development partners and these have made significant
supports towards developing the renewable energy sector of the country. These
multilateral development partners include the African Development Bank (AfDB), the
World Bank (WB), the United Nations Development Program (UNDP), the French
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Development Agency (Agence Française de Développement, AFD), the Kreditanstalt
für Wiederaufbau (KfW) – a Germany’s state-owned bank, the Millennium Challenge
Corporation (MCC) and the State Secretariat for Economic Affairs (SECO). The
AfDB, SECO and the WB are supporting the Ghana Energy Development and Access
Project (GEDAP) which comprises of a number of project components. One such
notable project component of the GEDAP supported by its development partners is the
promotion of a mix of RE-based models, including four pilot mini-grids to serve nearly
10,000 people in selected deprived communities in the country (CIF, 2015). These
development partners are supporting GEDAP by offering financing of small and
medium hydropower, wind and biomass resource assessments in the country. For
instance, the AFD is offering support for hydropower assessments in the country. Also,
Germany’s state-owned bank Kreditanstalt für Wiederaufbau (KfW) is working with
Ghana’s VRA to finance a 12 MW PV project in Ghana. The 12 MW PV project is
expected to be completed in 2016. It will be located in the Upper West Region of
Ghana, and would be owned and operated by the VRA (CIF, 2015). Other areas of
development assistance are in small-scale applications of renewable energy for
productive use. These are supported through the EnDev initiative, managed by the GIZ
(The Deutsche Gesellschaft für Internationale Zusammenarbeit , GmbH)30. The GIZ
30 The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH or GIZ
in short, is an organization owned by the German Federal Government. The GIZ
specializes in international development in a number of countries. GIZ works in a
variety of fields including energy, economic development and employment;
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through its GIZ RE project in the country is involved in supporting regulatory and
capacity building activities in the country. Other key external development partners
engaged in the renewable energy sector of Ghana include the governments of Korea,
Japan and China (CIL, 2015).
It is evident that a number of development partners are making efforts in
various capacities to support the energy sector. However, it is very important for the
government and people of Ghana to recognize that the responsibility for sustainable
energy deployment in the country is first and foremost that of the Government of
Ghana, and its people. Taking cognizance of this truth can help propel the country to
taking appropriate and efficient actions that can lead to significant progress in
sustainable energy deployment for socio-economic development. Putting in place clear
sustainable energy development objectives and goals would facilitate harnessing the
various forms of support the country receives from its external development partners.
In this way Ghana can avoid any unintended conflicts (of interests) and undesirable
conditions that might come with support from its development partners.
3.7 Major Power Supply Challenges
Major challenges facing Ghana’s power sector over recent years include
securing sufficient power supply to meet growing demand, providing the population
with access to energy services and reducing the power sector’s contribution to GHG
governance, democracy and poverty reduction; education, health and social security;
environment and infrastructure; and agriculture, fisheries and food.
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emissions. Existing power plants are unable to generate power at full capacity due to a
number of factors. These include fuel supply constraints, and the inability to adequate
manage low water inflows (as a result of low rainfall) into the hydroelectric power
facilities. For the most part in recent years, the Akosombo hydro power plant had been
running on three turbines instead of six due to low water levels in the dam. The Bui
Dam had not been able to run at full capacity as one out of four turbines in the Kpong
Dam had not been on line. The Asogli plant had also been shut down due to fuel (oil)
contamination (Gadugah, 2014). Frequent power cuts in Ghana is not a new or recent
challenge; this phenomenon has persisted for over the past ten years.
Power transmission and distribution losses31 in the country’s power distribution
network in mid-2012 was high – about 30%. It is estimated that a 10% reduction in
losses would save ECG US$85 million per year (World Bank Energy Group, 2013). It
was reported by the World Bank (2013) that whereas the technical performance of
VRA’s hydro plants are good, the performance of its thermal power plants are way
below acceptabe norms. These drawbacks in performance are partly responsible for
low power plant availability and for that matter power outages – a situation that
aggravates electric load shedding in the country. A number of ways to curtail these
problems exist. The Ghanaian government can set a good example by ensuring that
31 Electric power transmission and distribution losses include losses in transmission
between sources of supply and points of distribution and in the distribution to
consumers, including pilferage. These losses are worsened by poor revenue collection,
from both Government entities as well as private consumers (World Bank, 2013).
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public institutions and similar public setups make payments owed to the utility
companies in terms of outstanding utility bills. Effective metering and theft prevention
measures need to be put in place. This can reduce pilferage, and thus contribute to
reducing power distribution losses.
This study is of the view that effective policy-driven large proportion of
decentralized renewable energy electricity deployment in Ghana would encourage
consumers to become power generators and for that matter active players in the power
sector and this would enlighten consumers on energy issues in the country. This would
also enable consumers to become more responsible in taking actions that can
contribute to ameliorating electric power distribution losses in the country.
3.8 Renewable Energy Potential
Ghana’s solar energy resource spreads wide across the country. Daily solar
irradiation level ranges from 4.4 kWh/m2 to 6.5 kWh/m2 as shown in the solar
irradiation map of the country in Figure 3.5 below. The annual duration of sunshine
ranges from 1800 to 3000 hours. Given this excellent amount of irradiation over the
country, this study is of the view that creating an enabling environment that fosters
distributed solar PV deployment at the residential, commercial, and industrial sectors –
one that turns consumers of electricity into self-sufficient generators through solar PV,
will go a long way to improving the socio-economic situation of many in the country.
The northern belt of the country has the highest irradiation levels and represents over
60% of the total national land mass. There are over 6,000 solar systems with an
installed capacity of 3.2MW, and these are mainly for off-grid applications (Ghana
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Renewable Energy Directorate, 2013). The government of Ghana recently (in 2015)
launched a 200,000 rooftop solar system project in homes32 (Ghana's EPA, 2015a).
Figure 3.5: Solar Irradiation Map of Ghana.
32 Ghana’s First Biennial Update Report (2015) indicates that the 200,000 household
solar PV is expected to be funded through the Country’s Renewable Energy Fund
being created and also through special electricity levy (Ghana's EPA, 2015b).
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According to Ghana’s Third National Communication Report to the UNFCCC, the
household solar PV project is expected to result in nearly 120MW installed solar PV
capacity (Ghana's EPA, 2015a).
Ghana’s Renewable Energy directorate (2013) reported that the country’s gross
energy wind potential is about 5,640 MW representing about 1,128 km2 of land. The
country’s wind power potential occurs mainly along the coastal region of the country,
and the strongest wind speeds measurements are east of the Greenwich (Prime)
Meridian (SNEP, 2015). Average annual wind speed measurements, and estimated
annual energy for three specific sites within this wind potential region are presented in
Table 3.5 below. These wind potential can be used in both on-grid and off-grid
applications.
Table 3.5: Analyzed Wind Speed Measurements for Ghana.
Site Average Annual Wind
Speed (m/s) at 60m
Capacity
Factor (%)
Estimated Annual
Energy (MWh/yr.)
Sege/Ningo 5.47 25 - 29 6,088 – 6,751
Atiteti 5.97 25 - 30 6,377 – 7,125
Avata 5.07 22 - 26 5,515 – 6,030
Source: SNEP (2015).
A number of companies are reported to have obtain provisional licenses to develop
wind farms in the country, however, none of these companies is yet at the construction
stage (SNEP, 2015).
Though there is current no reliable data on its potential, interest in wave energy
development in Ghana has come up recently. Currently, a Ghanaian group is reported
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to have started developing a 240 kW pilot wave power project which was expected to
be completed by the end of 2015. This wave power pilot project is towards assessing
the viability of a possible scale up of the technology (SNEP, 2015).
Ghana’s small hydropower potential is estimated at a total of 820 MW. This
potential of hydropower represents 21 mini, small and medium hydropower capacities
ranging from 4 kW to 325 kW identified at different locations in the country.
Figure 3.6: Ghana Small Hydro Potential Map.
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These include power projects over the Pwalugu on the White Volta, the Juale on Oti
River, the Hemang on Pra River and another on the Tano River (see Figure 3.6 above).
According to the country’s national energy policy, the Government of Ghana intends to
support the development of these additional hydropower capacities (Ministry of
Energy, 2010a).
Ghana’s bioenergy potential is vast. The country’s annual rainfall of about
1,300 – 2,200mm, suitable climatic and soil conditions, supports large-scale
agriculture, energy crops and is also sustainable for wood fuel production. The
different types of biomass exploitable for energy production in Ghana include energy
crops, agricultural and forestry residues, wood processing wastes, and municipal solid
waste.
Energy crops for potential biofuel production in Ghana include jatropha, oil
palm, sunflower, soybean and coconut for biodiesel and sugarcane, sweet sorghum,
maize and cassava for ethanol (Ahiataku-Togobo & Ofosu-Ahenkorah, 2009). Though
energy crops, maize and cassava are necessary stable food crops in Ghana. Maize is
cultivated in all the agro-ecological zones of the country. In 2008, about 1.50 million -
tons of maize was harvested from an area of about 850,000 ha compared to about 1.90
million - tons produced in 2010 showing an increase in production. In 2010, about
13.50 million tons of cassava was harvested in the country from an area of about
875,000 ha (FAO Statistics Division , 2013). An increase in cassava production in the
country in recent years is attributable partly to the introduction of high-yielding new
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varieties and also to the country’s Presidential Special Initiative (PSI) on Cassava
production. The Statistical Division of the Food and Agriculture Organization of the
United Nations estimated the production of sugar cane in the country in 2010 to be
145,000 (FAO Statistics Division , 2013). In Ghana, sorghum is cultivated in the
savanna zones. The FAO crop statistics reported sorghum production of about 324,000
tonnes from an area of about 253,000 ha in the country for the year 2010. Total
commercial jatropha plantations in the country in 2013 was estimated to cover about
12,000 hectares (SNEP, 2015). Oil palm plantations in the country cover about
320,000 ha. Coconut covers about 30,000 ha, while sunflower covers only 230 ha
(UNEP RISØ, 2013). The government of Ghana is interested in re-invigorating
sugarcane cultivation for the production of sugar in the country. In addition to fuel
crops for energy, there is the potential in the country for obtaining energy from waste.
It is estimated that municipal solid waste generated annually in Accra, (the
capital city of Ghana) consists of about 129,200 tons of organic matter. This large
stream of waste is a potential source of bioenergy. The government of Ghana and some
non-governmental organizations have taken initiatives to develop biofuels in the
country. Another source of waste for energy in Ghana is forest residues. It is estimated
that approximately 976,000 m3 of forestry residue was generated in the country in
2008. These residues produced in the country are substantial inputs for bioenergy
production in the country (Duku, Gu, & Hagan, 2011).
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3.9 Renewable Energy Policies and Strategies
Ghana’s national energy policies since 1998 to date have in one form, or the
other sought to promote renewable energy in the country. Table 3.6 presents a brief
summary of some renewable energy strategies and policies in Ghana within this time
frame.
Table 3.6: Renewable Energy Development Strategies and Policies in Ghana.
Renewable
Energy Policy Year Policy Type/Strategy Policy Target
Feed-in-Tariff
Scheme 2013
Passage of feed-in-tariff
scheme into legislation.
Renewable energy technologies (solar,
wind, biomass, waste to energy and
hydro) for electric power generation.
Renewable
Energy Law 2011
Feed-in tariff, renewable
energy purchase obligations,
establishment of renewable
energy fund, tax exemptions.
Renewable energy for heat and power.
National
Energy Policy 2010
No specific mention of
policy types. Just mentioned
energy sector challenges and
government objective to
overcome them.
Covers the whole energy sector
including waste to energy, solar,
hydropower, geothermal, multiple RE
sources, power, bioenergy, and biofuels
for transport.
National
Biofuels
Policy
2010
Modernization of biofuels,
fuel standards, feed-in-tariff
for biofuels and electricity
from biofuels.
Biofuels, bio-power, and energy from
waste.
National
Electrification
Scheme
2007
Research, development and
deployment (RD&D),
Research program,
Technology deployment and
diffusion, Economic
instruments, Fiscal/financial
incentives, Grants and
subsidies.
Wind, on shore, bioenergy, biomass for
power, multiple renewable energy
sources, power, solar, wind.
Ghana Energy
Development
Access Project
2007
Economic instruments,
fiscal/financial incentives,
loans, economic
instruments, fiscal/financial
incentives, grants, and
subsidies, economic
instruments, fiscal/financial
incentives, tax relief.
Wind, solar, solar PV.
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Renewable
Energy Policy Year Policy Type/Strategy Policy Target
Strategic
National
Energy Plan
(2006 - 2020)
2006 Policy support, strategic
planning.
Multiple renewable energy sources for
power, heating.
Renewable
Energy
Service
Program
(RESPRO)
1999
Economic instruments, direct
investment, infrastructure
investments.
Solar, solar PV.
Tax and Duty
Exemptions 1998
Economic instruments,
fiscal/financial incentives,
tax relief, economic
instruments, fiscal/financial
incentives, Taxes.
Wind.
Source: Modified from Gyamfi et al. (2015).
Ghana’s National Energy Policy Act of 2010 encapsulates the country’s vision of an
“Energy Economy.” The Act emphasizes support for private sector participation in
promoting sustainable and efficient energy generation in the country. The country’s
Renewable Energy (RE) Law of 2011 mandates a 10% of renewable in the total
national electricity generation mix by 2020.
However, Ghana’s 2015 INDC33 (Intended National Determined Contribution)
document, projects a “conditional” 10% penetration of renewables by 2030 (GH-
INDC, 2015) as part of the country’s “conditional” emissions mitigation policy actions
and emission reduction actions. This “conditional” penetration of 10% by 2030 is part
of the country’s additional 30 percent emission reduction policy plan. This plan is
33 The INDC (Intended National Determined Contribution) of a country is the publicly
outlined post-2020 climate actions a country intends to undertake towards a low-
carbon, climate-resilient future.
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contingent upon external support (finance, technology transfer, capacity building)
which will cover the full cost of implementing the mitigation action (INDC, 2015).
Thus, whereas the country’s RE bill mandates 10% by 2020, the 10% by 2030 in the
country’s INDC document is a conditional projection.
Other efforts proposed in the Renewable Energy Bill of 2011include the call for
the establishment of; a) a feed-in-tariff regulation, b) purchase obligations c)
distributed generation (net metering), d) off-grid electrification of isolated
communities, e) provision of clean cooking stoves, f) research and development g) a
renewable energy fund, h) tax exemptions for renewable energy projects, and i)
establishment of a renewables authority. In line with the provision of the Renewable
Energy Act of 2011, a feed-in-tariff (FIT) scheme was passed into legislation in
August 2013. A renewable energy fund and net metering system (for distributed
generation) among other provisions are yet to be put in place. Technology-specific
rates entailed in the FIT scheme are listed below in Table 3.7.
Table 3.7: Technology Specific Feed-in-Tariff of Ghana (Effective October, 2014).
Renewable Technology FIT (GHp/kWh)
Maximum
Capacity (MW)
Wind With Grid Stability
Systems 55.7379
300MW
Wind Without Grid Stability
Systems 51.4334
Solar PV With Grid
Stability/Storage Systems 64.4109
150MW
Solar PV Without Grid
Stability/Storage Systems 58.3629
Hydro ≤ 10MW 53.6223 No Limit
Hydro (10MW > ≤ 100MW) 53.884 No Limit
Biomass 56.0075 No Limit
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Renewable Technology FIT (GHp/kWh)
Maximum
Capacity (MW)
Biomass (Enhanced
Technology 59.0350 No Limit
Biomass (Plantation as Feed
Stock) 63.2891 No Limit
Source: (PURC, 2014)
The 0.1% of renewables in Ghana’s generation mix at the end of 2014 (see
Table 3.4) is indicative of the fact that the country does not seem to be well on course
towards achieving its mandate of a renewables pernetration of 10% by 2020. This
study is of the view that this could partly be attributable to:
The lag time between instituting the mandate of 10% by 2020 (in 2011) and
the time of instituting a renewables feed-in-rates scheme (in 2013) expected
to stimulate investment in the renewable energy sector.
Policy measures which would have facilitated acheiving the mandate are not
yet in place or fully operational. These include establishing of a RE
development fund.
In the “2015 Energy (Supply and Demand) Outlook” report for Ghana, the
country’s EC (Energy Commission) asserted that considering the country’s prevailing
non-residential electric tariff (see Table 3.8 below) it would be cost competitive
pursuing mass deployment of solar PV given that the FIT for solar is 58.36 pesewas
per kWh (18.24 US cents per kWh equivalent) for systems without back-up storage
and 64.41 pesewas per kWh (20.14 US cents per kWh equivalent) for systems with
back-up storage (see Table 3.7 above).
Table 3.8: Prevailing Non-Residential Electric Tariff for Ghana (2014 and 2015).
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Consumption Class
Rate (GHp/kWh)
Gp per kWh US Cents per kWh
Year 2014 2015 2014 2015
0 – 100 45.2 60.79 16.99 16.00
101 – 300 45.2 60.79 16.99 16.00
301 – 600 48.1 64.69 18.08 17.02
600+ 75.9 102.08 28.53 26.86
NB: US Cent = 2.66 Ghana pesewas (Gp) average in March, 2014.
US Cent = 3.80 Ghana pesewas (Gp) average in March, 2015.
Source: (Energy Commission, Ghana, 2015).
The Ghana Energy Development and Access Project (GEDAP) is another
policy that has been used to promote renewables deployment in Ghana. The goal of the
GEDAP amongst others since its incepting in 2007, has been to improve the
operational efficiency of the electricity distribution system and increase the
population's access to electricity. GEDAP objective is also to support the country’s
transition to a low-carbon economy through reduction in greenhouse gas emissions
(GHG). The key elements of the project are: (a) sectoral and institutional development,
through technical assistance, capacity-building, and research towards strengthening the
capacity of key institutions participating in the project; (b) improvement in electric
power distribution through the construction of eight new 33/11 kV substations in the
country, construction and strengthening of bulk supply points, and upgrading of
existing substations in several targeted distribution areas; and (c) renewable energy and
electricity access, which involves setting up of new institutional, regulatory, and
financing frameworks towards expansion of access (The World Bank, 2015). Though
the implementation of the GEDAP is on course, a recent report from the World Bank
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Group indicates that in general the implementation has been slower than expected (The
World Bank, 2015).
Ghana’s Strategic National Energy Plan (SNEP) from 2006 to 2020 is focused
on the use of the country’s available energy resources including renewable sources (of
wind, solar energy and biomass) towards a long-term development and sustainability
of electricity supply for economic development. However, the main challenge to
implementing the strategies in the SNEP is that the Government of Ghana did not
formally adopt it.
The National Electrification Scheme (NES) was instituted in 1989 with the
objective of bringing electric access to rural areas in Ghana. The main purpose of the
NES was to bridge the urban-rural gap in terms of access to electricity and to enable
economic opportunities that come with access to electricity and modern energy
services. The NES’s plan, therefore, was to connect all communities with a population
above 500 to electricity supply towards achieving a goal of universal access by 2020.
The NES program entails the construction of new generation and transmission
facilities. The vision for establishing the NES was for it to serve as a catalyst for an
overall socio-economic development of the country. It was to support local indigenous
industries, create jobs and enhance other sectors of the economy such as agriculture,
health, education and tourism (Abavana) (Barfour, 2013).
Ghana’s draft National Biofuel Policy is yet to be enacted into legislation.
According to the draft policy, the goal of the government of Ghana regarding
bioenergy is to modernize and maximize the benefits of bioenergy on a sustainable
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basis. In addition to defining strategies for development of biofuels in the country, the
National Biofuels Policy Draft offers recommendations on infrastructure development,
institutional framework, regulatory framework including licensing, quality of product
and fiscal incentives to attract investments into the sector (Energy Commission, 2010).
3.10 Energy Efficiency Policies and Strategies
Rolling blackouts over the years in Ghana is one key motivating factor for the
government of Ghana’s pursue of energy efficiency improvement in the country. The
government established the Ghana Energy Foundation to promote energy efficiency
among other measures towards sustainable development. Through collaboration with
the United States of America’s Lawrence Berkeley National Laboratory, the Ghana
Energy Foundation developed a report titled “The Ghana Residential Energy Use and
Appliance Ownership Survey: Final Report on the Potential Impact of Appliance
Performance Standards in Ghana” in 1999. This report became the basis for the
advancement of the Ghana Electrical Appliance Labelling and Standards Program
(GEALSP) which began in 2000 – a first of its kind in the sub-Saharan African region.
Subsequently, a number of performance standards have been enacted in the country,
and Table 3.9 below gives a summary of their implementation timelines.
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Table 3.9: Ghana's Energy Efficiency Performance Standards (as of 2013).
Product Description Year
Implemented Year Revised
Air Conditioners 2002 2005, 2008
Lighting – CFL 2008
Lighting – Incandescent 2008
Refrigerators, refrigerator-
freezers 2009 2010
Source: Energy Efficiency Strategies, 2014.
Ghana’s revised Energy Efficiency Standards and Labeling (on-ducted air
conditioners and self-ballasted fluorescent lamps) Regulation LI1815 was enacted in
2005. The regulation (LI1815) set the country’s minimum energy performance
standard (MEP) for air-conditioners at an energy efficiency ratio (EER)34 of 2.8 watts
of cooling per watt of electricity input (equivalent to 9.55BTU/Watt). As a result, air
conditioners usually available on the Ghanaian market are with an EER of 3.5 and
above. The minimum energy requirement for compact fluorescent lamps (CFLs) is 33
lumens of light per watt of electricity (i.e. the lamp should provide a minimum of 33
lumens of light per each watt of electricity consumed). Under the regulation, each CFL
is expected to have a minimum service life of 6,000 hours. To make compact
fluorescent lamps (CFLs) more affordable towards implementing the country’s
34 The higher the energy efficiency ratio (EER) the more efficient the appliance or the
product.
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performance and efficiency standard for CFLs, the government of Ghana removed
import duties and value added tax (VAT) on compact fluorescent lamps.
The country’s air-conditioner MEPS is projected to save US $64 million in
annual energy bills and reduce carbon dioxide (CO2) emissions by 2.8 million tons
over 30 years (Ofosu-Ahenkorah & Constantine, 2002). The comprehensive regulation
included provision for labeling of appliances. The labeling scheme applies to room air
conditioners and CFLs. It uses a “star” rating system (ranging to five stars) for
different efficiency categories with more stars meaning higher efficiency such that a
product with five stars is the most efficient. Ghana passed into law and adopted its
Energy Efficiency Standards and Labeling (Household Refrigeration, Refrigerator-
Freezer, and Freezer) Regulations (LI 1958) in 2009. The LI 1958 regulation was
revised in 2010.
To further promote energy efficiency in Ghana, the government of the country
began the “Promoting of Appliance of Energy Efficiency and Transformation of the
Refrigerating Appliances Market in Ghana” project in 2011. With funding support
from the United Nations Development Program (UNDP) and the Global Environment
Facility (GEF), the Government launched a “rebate and turn in” scheme program in
September 2012. The objective of the “rebate and turn in” scheme was to encourage
consumers to exchange their old refrigerators for new and efficient ones, available at a
discounted price. It was expected that about 15,000 old refrigerators would be replaced
in the country by the end of 2015 (UNDP, 2015). As a result of a ban on the
importation of used refrigerators, the importation of used refrigerators has dropped by
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63%. The “rebate and turn in” project was estimated to deliver an annual energy
savings between 30% and 50% contingent upon the scope of market transformation
incentives (UNDP).
3.11 Renewable Energy Deployment Barriers
Key barriers that hinder renewable energy technology deployment in Ghana
include financial, economic, technical, infrastructure, regulatory and administrative
obstacles. These barriers are discussed in the subsections below.
3.11.1 Technical and Infrastructure Barriers
Access to good and low-cost technical information and requisite technical skills
are critical for the expansion and best functioning of a renewable energy technology
market in Ghana. However, Gboney (2009) asserted that the country does not have that
adequate critical mass of expertise domestically. Given that such domestic mass
critical skill is especially needed during the roll-out phase of deployment for a
sustainable renewable energy technology absorption and adoption, Ghana would need
to domestically develop more of such skills. Gboney (2009) further noted that such
sustainable mass capacity of technical skills can be developed through hands-on
training to enable the country to use local expertise to maintain and operate all future
projects. A developed and sustained technical capacity in the country would ensure that
renewable power generation does not underperform technically, and this will mitigate
technological risk.
The integration of higher percentages (approximately more than 30%) of
renewable energy resources (including distributed generation) into power grids usually
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presents a new set of technological challenges not previously faced by the grid (Bird,
Milligan, & Lew, 2013). These challenges usually arise from the uncertainty and
variability of wind and solar generation. Ghana’s current electric power grid may
require some upgrades if the country is to increase its renewables penetration. This can
be done through upgrading existing grid technologies through the introduction of new
smart grid technologies that enable bi-directional data flow and real time forecasting
(Bird, Milligan, & Lew, 2013).
The World Bank (2013) and the USAID (1999) have asserted that underlining
Ghana’s technical and infrastructure barriers has been a weak electric tariff regime and
under-recovery of electric bills with consequent underfunding and under-investment
resulting in unreliable supply (USAID, 1999) (World Bank, 2013).
3.11.2 Financial and Economic Barriers
Significant investments in Ghana’s electric power sector are needed to meet the
country’s expanding electric power demand. A recent World Bank report estimates that
the country needs to invest over US$ 4 billion in the next ten years to make up for the
past investment deficits (World Bank 2013). In a developing country in Africa like
Ghana, such huge investment requirements pose an enormous financial challenge. The
addition of large capacities of renewable energy by the state-own utility - VRA will be
a herculean-financial challenge. This is due to the capital-intensity nature of large-scale
renewable energy technology projects and VRA’s weak financial standing over the
years incapacitates it to do this on it own.
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An alternative means to the government of Ghana investing, is to have the
private sector - independent power producers (IPP’s) invest in the power sector of the
country. However, in spite of efforts to attract IPPs into the power sector, the World
Bank (2013) noted that this has not been very successful. According to the World Bank
(2013), this has been so because potential IPPs lack a credible buyer since Ghana’s key
electricity distributor, Electricity Company of Ghana (ECG) (who would serve as an
offtaker/buyer), is in poor financial health. The inability of ECG to sufficiently meet
the requirements of an offtaker raises legitimate concerns about its ability to pay
independent power producers. ECG’s poor credit rating poses further financial risk
barrier to potential independent power producers (IPPs) entering into the country’s
power sector since this can potentially make it difficult for IPPs to obtain financing to
construct renewable energy facilities in the country.
For residential and commercial customers (which constitute about 70% of total
consumers) the deployment of small modular renewable energy systems such as
rooftop solar PV will greatly contribute to electric power security and enhancement of
local sustainable socio-economic welfare. However, the upfront cost of renewable
energy technology systems would be a challenge to such prospective owners. Many of
these consumers are low-income earners and lack access to credit to purchase or invest
in renewable energy technologies as a result of poor credit worthiness and lack of
collateral. An effort by the Ghanaian Government to address financial barrier has been
to tackle unfavorable pricing policy and financing schemes (such as fuel subsidies) for
conventional energy. This is being addressed by gradually raising consumer electricity
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bills to better reflect the country’s generation mix (which is no longer entirely
dominated by cheap large hydo). However, more remains to be done in terms of
boosting the economic competitiveness of renewable energy against fossil energy
through appropriate pricing of electricity to reflect real costs.
The uncompetitiveness of renewable energy technologies against conventional
technologies is partly attributable to market failure to internalize the cost of
externalities associated with power production from conventional fuel sources (IEA,
2011) (IRENA, 2014a). Due to such market failures, the levelized cost of energy
(LCOE) estimates for renewable technologies do not compare favorably with that of
their conventional counterparts. It is in this regard therefore that, economic support for
renewables is justified as a means of “buying” the environmental and social benefits
Figure 3.7: Effects of Internalizing Externalities into the Pricing of Renewable and
Conventional Energy Technologies.
Source: IEA, 2011.
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that renewable energy technologies tend to offer which the market would not otherwise
internalize (IRENA, 2014) (IEA, 2011). This idea is illustrated in Figure 3.7 above.
Figure 3.7 shows situations of “no policy” and “policy intervention” and how
externalities effect prices of renewables and non-renewables.
3.11.3 Regulatory Barriers
Ghana’s current renewable energy strategy is made up of two broad policies; a
feed-in-tariff (FIT) policy and an RPS (target of 10% capacity of renewables by 2020).
However, the current structure of the country’s policy instruments - RPS and FIT
policies render them inadequate to promote a renewable energy revolution in the
country due to the following reasons:
The country’s RPS of 10% by 2020 is not stringent or aggressive enough to
stimulate a larger proportion of renewable energy technology deployment that
has a high number of prosumers.
The country’s current FIT scheme is not renewable prosumer-ship enabling as
it mainly supports utility-scale renewable energy technology deployment by
IPPs only, and
The country’s national renewable energy policy framework is fragmented; the
FIT and the RPS policies are not comprehensive enough to best support
renewable energy development and deployment in the country.
Also, the implementiaon of an Energy Fund stipulated in the country’s RE Law of
2011 is yet to be fully implemented. A renewable energy fund when established can
support investment, education and capacity building in renewable energy technology
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deployment as well as research and development. Therefore, planning for renewable
energy technology deployment without making adequate provision for financing the
plan’s implementation is a recipe for failure.
3.11.4 Institutional and Administrative Barriers
Renewable energy programs and regulations are mandated for implementation
by government regulators through utilities. However, utilities usually have inherent
conflicts with customer-sited renewables. These biases and prejudices on the part of
utilities lead to “lack of utility acceptance” of the concept and promotion of electric
power prosumerism. Gboney (2009) noted that one of the main renewable energy
regulatory challenges is how to enhance the operations of the regulatory agencies,
policymakers, and other stakeholders to unlock domestic policies that catalyzes
technology transfer during the implementation and roll-out stages of deployment.
This study is of the view that one of the missing gaps towards the
implementation of a prosumer based renewables is an appropriate and suitable
implementation framework and institution. Such a framework would need to be set up
to operate outside of existing regulatory entities and conventional utilities. Such a new
framework would require a new implementing entity/institution that operates with
significant private sector business expertise. The role of such an entity would be
complimentary to the country’s existing structures. With a focus directly targeted and
vested in turning energy users into energy producers, i.e. prosumerism. In that way,
such a new structure or system would become a focal point for energy efficiency and
139
renewable energy technologies deployment mainly among residential, commercial, and
industrial customers.
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Chapter 4
ESTIMATED BENEFITS AND COST
4.1 Scope of Scenarios and Key Factors
In line with the research statement and questions for this study, the scope of
scenarios for analysis constructed are characterized as follows: the scenarios are
designed:
a) to be within a medium-term chronological horizon of 20 years (from 2015 to
2035) - with static observations of 10 years interval; thus from 2015 to 2025
and from 2025 to 2030;
b) to have a thematic analytical coverage of employment benefits estimation (i.e.
economic benefit), carbon-dioxide emission savings and water savings
associated with electricity (environmental and/or social benefits) and;
c) to have a geographical scope of a national scale without any recourse to
regional, municipal, district or city level analysis.
The scope and boundaries in terms of temporal, and geographical range set forth in
constructing the scenarios for analysis allow for simplicity and practical manageability
of the analyses, and this enables making meaningful and valid assumptions.
The key factors within the scope of this study that influence the construct of scenarios
include: a) Ghana’s electricity supply and demand projections; b) the rate of
deployment of renewable energy in the country, in terms of capacity (MW) deployed
for meeting projected power demand, and c) assumed energy use efficiency in the
country over the projected years. The specifics of these key assumptions in the
141
construction of scenarios are based on reports and other publications on the energy
situation in Ghana. These energy situations of Ghana are highlighted below.
a) Ghana’s Ministry of Energy and Petroleum (MOEP) indicated that the
country’s electricity demand is growing at a rate of about 10% per annum
(MOEP 2014).
b) Natural Gas is expected and therefore assumed to play an important role in
Ghana’s power genertion as the country expands its domestic generation of the
resouce. This reflects in the high and higher proportions of natural gas in the
BAU and the SED scenarios respectively relative to what is assumed in the
REV case.
c) Additional renewable power capaicies within the period under analyses (2015
to 2035) is assumed to come from wind power and solar PV35.
d) No retirement of older power plant generation within the period of analyses of
2015 to 2035 is assumed.
In general, assumptions used for estimates in this study are rationalized and justified
according to conservative, credible, and available dataset where data exist and to
conservative expectations in other cases where specific data does not exist.
35 Although the potential for renewable energy resources such as mini-hydro exist, this
study assumes only wind and solar PV capacity additions in its scenarios construction
as these technologies (wind and solar PV) have been the most prospective ones
receiving the most attention so far in the country’s efforts at renewables deployment.
142
4.1.1 Description of Scenario Types
Theoretically, there are many potential energy deployment pathways
conceivable for Ghana. However, practical experience from many scenario studies
(with particular focus on energy and environment) have shown that 3 to 5 scenarios are
what can be meaningfully distinguished from one another for clear comparison
purposes (Greeuw, et al., 2000) (Kosow & Gaßner, 2008).
Within the scope of this study, three distinct scenario constructs are identified
for the case of Ghana. These three types of scenarios and their underlining reasoning
and further descriptions are presented in Table 4.1 below. The three scenario types in
Table 4.1 are developed and used for the analysis of jobs creation, electricity-related
water savings and carbon dioxide reductions. Detailed descriptions of these scenarios
are as follows.
143
Table 4.1: Scenario Types and Brief Descriptions.
Scenario
Type
Business as
Usual
(Current trend
prevails)
"Renewables
Dominate"
(In a centralized
model)
"Renewables
Dominate"
(In a decentralized
model)
Underlying
Reasoning/
Description
The scenario
assumes
Ghana’s current
use of energy
technologies
and practices
remain
proportionally
constant with
increasing
capacity
installations
and generations
into the future.
This scenario is
fossil fuel
resource
dominated.
This is a policy
driven renewable
energy scenario that
displaces a portion
of conventional
energy deployment
with mostly
centralized
renewables capacity.
The proportion of
renewables exceeds
the country’s
existing target.
Renewable energy
capacity added are
assumed to be from
solar PV and Wind.
Assumes a much more
renewbles capacity at
the expense of fossil
resouces. This is
driven by a strong
support for
decentralized/
distributed renewable
capacity additions over
a mostly centralized
situation that deliver a
one-way power supply
to consumers.
Conventional power
generation assumes
less prominence
whiles rooftop solar
generation, wind, solar
PV generation become
prominent and add
more installed
capacity.
144
4.1.2 Business as Usual (BAU), Reference Scenario
Assumptions made in constructing the BAU scenario are as follows:
Installed electric power capacity is assumed to increase at an annual rate
of 7% from 2015 to 203536.
An autonomous energy efficiency improvement (AEEI) of 0.5 % per
annum is assumed37. This assumed AEEI accrues to an energy
efficiency of 3.2 % from 2015 to 2035 and results in total electric power
savings of 524 MW over this period.
The proportion of renewable-sourced electricity in the added capacity
from 2015 to 2035 is 190MW, representing 2.5% of the total added
generation capacity (of 7,599MW) between 2015 and 2035. The
distribution of this 190 MW renewables installed capacity is assumed to
be from solar PV (125MW). The non-renewables added capacity from
36 An annual rate of 7% used (instead of the 10% reported as the growth rate for
electricity demand in the country) is based on the assumption that electric power
transmission and distribution losses; including losses in transmission between sources
of supply and points of distribution and in the distribution to consumers, including
pilferage are reduced substantially with electric grid system upgrades, increased
penetration of prosumer ownership and other measures.
37 AEEI is dependent on the price elasticity of energy and on income elasticity of
energy demand. It various from country to country and also depends on sectoral shares
in consumption and elasticities of consumption of energy (Webster, et al., 2008). The
AEEI assumed is this study is based on a range of AEEIs (mostly within 0.25 and 1.0)
determined in several integrated assessment models in literature presented by Webster
et al. (2008).
145
2015 to 2035 is assumed to be 64.6% (4,910MW) natural gas and
32.9% (2,500) coal (see Table 4.2). Based on these, renewables in the
total accumulated installed capacity (of 10,429 MW) by 203538 is
projected to increase the country’s total renewables (excluding large
hydro stations) from 0.09% in 2015 to 1.9% by 2035.
Table 4.2: Distribution of Added Capacity in BAU Scenario (2015 to 2035).
As shown in the Table 4.2 above (for the BAU scenario), fossil fuels dominate
the fuel mix of added capacity: 97.5% of the added capacity from 2015 to 2025; and
96.0% of the added capacity from 2025 to 2035. This, resulting altogether in a 97.5%
of fossilized sourced capacity from 2015 to 2035. The BAU scenario assumes
dominance of fossil sources (natural gas and coal). More natural gas sourced electricity
is assumed because there is a high chance of Ghana depending more on its natural gas
production that comes on stream to supply thermoelectric power generation.
38 Total accumulated installed capacity by the year 2035 is the sum of assumed added
capacity between 2015 and 3035 (7,599 MW) and the existing capacity by 2015 (of
2,830 MW).
Additional Installed Capacity (MW)
2025 2035
Fuel MW % Share MW % Share
Natural Gas 1,539 59.09 3,370 53.51
Coal 1,000 38.41 1,500 42.49
Solar PV 65 2.50 125 4.00
Total Capacity 2,604 100 4,995 100
146
4.1.3 Sustainable Energy Deployment (SED) Scenario
The main assumptions used in constructing the SED scenario are as follows:
Installed electric power capacity is assumed to increase at an annual rate
of 7% from 2015 to 2035.
It is assumed a strong policy driven national energy efficiency program
would translate into an annual electric power capacity reduction of 1%.
The above projected annual energy efficiency reduction accrues to a
6.2% reduction in projected installed capacity from 2015 to 2035 (i.e.
1,015MW reductions in projected installed capacity over this period).
Based on this, the total accumulated installed capacity in the country is
projected to be 9,938MW by 2035. The share of renewables (excluding
existing large hydro stations) would increase from 0.09% in 2015 to
20% by 2035. The assumed distribution by sources of added renewable
energy generation capacity for the SED scenario is 68.6% (1,360 MW)
from solar and 31.4% (624 MW) from wind.
Table 4.3: Distribution of Total Added Generation Capacity in SED Scenario.
Additional Installed Capacity (MW)
2025 2035
Fuel MW % Share MW % Share
Natural Gas 1,981 80.01 3,142 67.82
Wind (Onshore) 124 5.00 500 10.80
Solar PV 371 14.99 990 21.38
Total Capacity 2,476 100 4,632 100
147
As shown in Table 4.3, no coal generation source is assumed in the SED scenario.
Instead, there is more reliance of natural gas and an increase also in renewables (of
wind and solar PV) compared to the BAU scenario. This assumption is based on the
rational that the country could seek to depend on its natural gas supplies to augment
thermal generation capacity whiles ramping up renewables-based technologies
alongside.
4.1.4 Renewable Energy Revolution (REV) Scenario
A large renewables deployed in Ghana with a strong focus on local value
creation, through high penetration of PV prosumer support is what this study envisions
as a renewable energy revolution39 (REV) for the country. The main assumptions used
in constructing the REV scenario are as follows:
Similar to the BAU and SED scenarios, projected installed electric
power capacity is assumed to increase at an annual rate of 7% from
2015 to 2035.
A policy-driven energy efficiency improvement of 1.5% per year is
assumed. The above assumed annual energy efficiency improvements
translates into an efficiency of 8.9% over an unchecked situation over
the entire projected period of 2015 to 2035.
39 The role of large scale distributed solar PV penetration in the renewable energy
revolution scenario is based on Hermann Scheer’s “A Solar Manifesto” of which he
wrote “since everybody can actively take part, even on an individual basis, a solar
strategy is ‘open’ in terms of public involvement…” (Scheer, 2005 pp 202).
148
Projected proportion of renewable-sourced electricity in the total added
capacity from 2015 to 2035 is 3,787MW, representing about 57% of the
total added generation capacity (of 6,646MW). The assumed
distribution of the 3,787MW installed capacity from renewable sources
is 73.7 % (2,793MW) solar and 26.3% (994MW) wind power.
Table 4.4 below shows the distribution of the total added capacity from 2015 to 2035
in the REV scenario. Except for 2,860 MW capacity from natural gas between 2015
and 2035, the rest of the added capacity is from renewable sources.
Table 4.4: Distribution of Total Added Generation Capacity in REV Scenario
The distribution of capacity additions in the REV scenario (as shown in Table 4.4
above) assumes less reliance on natural gas compared to the SED and BAU scenarios.
Rather deployment of more renewable-based technologies of wind and solar are
assumed. Table 4.5 below shows the distribution as well as the differences between
renewable energy capacity added by 2025 and 2305 between the REV and SED
scenarios.
Additional Installed Capacity (MW)
2025 2035
Fuel MW % Share MW % Share
Natural Gas 1,177 50.00 1,683 39.20
Wind (Onshore) 294 12.50 700 16.31
Solar PV 883 37.50 1,910 44.49
Total Capacity 2,354 100 4,293 100
149
Table 4.5: Renewable Capacity in REV and SED scenarios and the Differences
between the REV and SED Scenario’s Installed Renewables Capacities.
4.2 Analysis of Benefits
Results and analysis of jobs creation (in job years),40 carbon dioxide emissions
estimates, and calculations on consumptive water associated with the BAU, SED, and
REV constructed under Section 4.1.2 and estimated based on the methods described in
Section 1.4 are presented below.
40 All “jobs” estimated are in “job-years.” In economic terms, jobs are created through
shifts in spending patterns between the power sector and other industries in the
economy. A “job” in this sense is defined in economic terms as a metric equivalent to
the resources required for employment of a person for 12 months (or 2 people working
for 6 months each, or 3 people working for 4 months each). This metric is what is
referred to as a “job year” (Bell, et al. 2015). Employment numbers in this study are
indicative only, as a large number of assumptions are required to make calculations.
Quantitative data on present employment based on actual surveys is unavailable and
difficult to obtain, so it is not possible to calibrate the methodology against time series
data, or even against current data on Ghana and other regions in Africa. However,
within the limits of data availability, the figures presented are indicative of electricity
sector direct employment levels under the three scenarios.
Additional Installed Capacity (MW)
2025 2035
Scenario
Solar Wind Solar Wind
REV
883
294
1,910
700
SED
371
124
990
500
REV – SED
512
170
920
200
150
4.2.1 Analysis of Direct Employment
As shown in Figure 4.6 below, estimates on employment (which exclude
energy efficiency jobs) reveal that the REV scenario creates 126,178 jobs between
2015 and 2035 which is about 26.9% (33,879) more jobs compared to that in the BAU
scenario (which is estimated to create 92,2999 jobs). As illustrated in Figure 4.1 below,
the rate of increase in total jobs in the BAU scenario is higher relative to that of the
SED scenario from 2025 to 2035. This trend is attributable to the fact that the rate of
capacity addition in the BAU scenario is higher within that period relative to that in the
SED scenario over the same period.
Figure 4.1: Total Cumulative Employment from BAU, SED and REV scenarios based
on projected installed capacities and technologies (2015 to 2035).
0
13.393
92.299
0
24.805
91.595
0
32.853
126.178
0
20
40
60
80
100
120
140
2015 2020 2025 2030 2035
TOTA
L JO
BS
CR
EAED
(IN
TH
OU
SAN
DS)
YEAR
BAU SED REV
151
The greater rate of capacity addition in the BAU over the SED from 2025 to
2035 is reflected in the rates of manufacturing, and construction and installation
employments created in the BAU scenario over the SED scenario.
The percentage breakdown of jobs from renewable and non-renewable sources is
shown below in Figure 4.2.
Figure 4.2: Percentage Employment from Renewables and Non-Renewable by
Scenarios (2025 and 2035).
Comparing the percentage of renewable energy jobs in Figure 4.2 (see above) with the
percentage of installed renewable energy sources in Figure 4.3 (see below) from which
these jobs are created, it is evident that the proportion of jobs is more than
proportionate to the percentage of installed capacity for renewable energy technology
2025 2035 2025 2035 2045 2055
BAU SEDS REV
Non-RE 88 93 59 41 26 16
Renewables 12 7 41 59 74 84
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tota
l Cu
mu
lati
ve J
ob
s A
dd
ed b
y %
152
jobs. The more than proportionate percentage is indicative that renewables deployment
creates more jobs compared to conventional energy deployment.
Figure 4.3: Percentage of Installed Cumulative capacity from Renewable and Non-
Renewable Power Technologies.
Though cumulative installed capacity decreases from the BAU to SED to REV
scenarios as a result of increasing energy efficiency, there is an increasing trend of
employment for both 2025 and 2035 cumulative jobs. This increasing pattern is shown
below in Figure 4.4. For instance, total projected capacity in 2025 BAU (with energy
efficiency) is about 2,604MW; which is more than that in 2025 SED, estimated to be
about 2,476MW. However, estimated total jobs in 2025 SED exceed that in 2025
BAU as can be seen in Figure 4.4 below. This increasing trend in jobs (even in the
situation of decreasing installed capacity) is attributable to the fact that renewable
2025 2035 2025 2035 2025 2035
BAU SEDS REV
Non-RE 97.5 97.5 80.0 67.8 50.0 39.2
Renewables 2.5 2.5 20.0 32.2 50.0 60.8
2.5 2.5
20.0
32.2
50.0 60.8
97.5 97.5
80.0
67.8
50.0 39.2
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
% o
f P
roje
cted
Cap
acit
y
153
energy technologies create more employment compared to conventional power
depoloyment.
Figure 4.4: Direct Employment for the Three Scenarios (BAU, SED, and REV) at 2025
and 2035 by Technology.
Direct employment estimates along the components of the energy value chain
of manufacturing, construction and installation, as well as operation and maintenance
for the BAU, SED and REV Scenarios (for 2015 to 2025 and 2025 to 2035) are
2025 2035 2025 2035 2025 2035
BAU SEDS REV
Solar PV 1.595 6.188 9.094 45.505 21.633 91.882
Wind - - 1.060 8.932 2.516 13.537
Coal 0.417 50.586 - - - -
Natural Gas 11.380 35.525 14.651 37.157 8.704 20.760
-
20.000
40.000
60.000
80.000
100.000
120.000
140.000
Cu
mu
late
d J
ob
s Ye
ars
(in
Th
ou
san
ds)
154
presented in Table 4.6 below. For all the scenarios (BAU, SED and REV) and within
all the various periods, (2015 to 2025 and 2025 to 2035), employment from
construction and installation are the most (90.39 – 96.86% of jobs), followed by
operation and maintenance jobs (2.31 – 7.24% of jobs) and then manufacturing jobs
(0.35 – 2.37%) (See Table 4.6 below).
Table 4.6: Direct Employment-based on the BAU, SED, and REV for Manufacturing,
Construction & Installations, and Operation & Maintenance (2015 to 2035).
* All jobs estimated are in “job years”. However, construction and installation jobs are short-
term employments that occur during the construction and installation phase of projects.
Operation and maintenance (O&M) jobs, on the other hand, are sustained over the lifetime of
the power generation technology systems.
Though construction and installation (C&I) jobs are the most, C&I employments are
short-term jobs that occur during the construction and installation phase of projects.
Operation and maintenance (O&M) jobs, on the other hand, are sustained over the
lifetime of the power generation technology systems.
Manufacturing Construction &
Installation
Operation &
Maintenance
Total
Jobs
Scenario
Duration
Job*
% of
Total
Jobs
*Job
% of
Total
Jobs
Jobs*
% of
Total
Jobs
BAU
2015-2025
318
2.37
12,106
90.39
969
7.24
13,393
2025-2035
660
0.84
76,426
96.86
1,821
2.31
78,906
SED
2015-2025
409
1.65
23,414
94.39
982
3.96
24,805
2025-2035
615
0.92
63,641
95.29
2,534
3.79
66,790
REV
2015-2025
243
0.74
31,442
95.71
1,167
3.55
32,853
2025-2035
329
0.35
89,788
96.21
3,208
3.44
93,326
155
Figure 4.5: Construction and Installation (C&I) Employment for BAU, SED and REV
Scenarios (2015 to 2035).
Figure 4.5 above shows that from 2015 to 2025, estimated construction and installation
employments in the SED scenario are more relative to the BAU case. This trend
changes towards 2035 and this change is attributable to the fact that total installed
capacity in the SED is lower relative to the BAU capacity due to the effect of assumed
higher energy efficiency in the SED scenario.
0
12,106
88,532
0
23,414
87,055
0
31,442
121,230
0
20000
40000
60000
80000
100000
120000
2 0 1 5 2 0 2 0 2 0 2 5 2 0 3 0 2 0 3 5
JOB
-YEA
RS
YEAR
BAU SED REV
156
Operation and maintenance (O&M) employments in the renewable energy
dominated scenarios (of SED and REV) are relatively higher than that of the BAU
scenario in absolute and proportionate terms as shown in Figure 4.6 below.
Figure 4.6: Operation and Maintenance (O&M) Jobs for BAU, SED and REV
Scenarios (2015 to 2025).
Though O&M employments are lower in proportion to C&I employments, O&M jobs
last over the entire operating life of the energy systems compared to C&I jobs that exist
only during the construction and installation phase.
0
969
2,790
0
982
3,516
0
1,167
4,375
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2 0 1 5 2 0 1 7 2 0 1 9 2 0 2 1 2 0 2 3 2 0 2 5 2 0 2 7 2 0 2 9 2 0 3 1 2 0 3 3 2 0 3 5
JOB
-YEA
RS
YEAR
BAU SED REV
157
Manufacturing jobs in absolute terms for the periods 2015 to 2025 and 2025 to
2035 as presented below in Figure 4.7 projects more number of manufacturing
employments in the renewable energy dominated scenarios (SED and REV) compared
to the BAU scenario; with employment in the SED scenario being more than in the
REV scenario.
Figure 4.7: Number of Manufacturing Employment for BAU, SED and REV Scenarios
(2015 to 2035).
No local manufacturing (i.e. zero percent local manufacturing) of RE systems in the
country was assumed in estimating manufacuting employment. This assumption
coupled with a higher installed capacity in the BAU scenario compared to the SED and
0
318
977
0
409
1,024
0
243
572
0
200
400
600
800
1000
1200
2 0 1 5 2 0 2 0 2 0 2 5 2 0 3 0 2 0 3 5
JOB
-YEA
RS
YEAR
BAU SED REV
158
REV, projects BAU manaufactuig jobs higher than that of REV manufacting jobs and
relatively closer to SED manufacturing jobs (see Figure 4.7 above). Increasing the
percentage of local manufacturing in installed RE capacity in the country would have
an effect of increasing manufacting jobs in the RE dominated scenarios (of SED and
REV) over the BAU scenario. The effect of increaing percentage of installed RE
technologies and local manufacturing of RE technologies on jobs is analyzed in the
next following sub-section (section 4.2.2).
4.2.2 Effect of Local Manufacturing on Employment
In estimating solar manufacturing employment for each of the scenarios in this
study, the percentage of domestic manufacturing for Solar PV is assumed to be zero.
However, to investigate the effect of local manufacturing on projected renewable
energy technology; especially solar PV, a what-if analysis (sensitivity analysis) is
carried out on solar PV. By varying the capacity of solar PV and the percentage of
local manufacturing associated with solar PV systems manufacturing, the number of
solar PV manufacturing related employment is calculated, and this is shown in the
Solar PV sensitivity grid below (see Table 4.7).
159
Table 4.7: Grid on Sensitivity of Solar Manufacturing to Percentage of Local
Manufacturing and Solar Capacity (in MW).
1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
400
24.66
49.32
73.98
98.64
123.30
147.96
172.62
197.28
221.94
246.60
425
26.20
52.40
78.60
104.80
131.00
157.20
183.41
209.61
235.81
262.01
450
27.74
55.48
83.23
110.97
138.71
166.45
194.19
221.94
249.68
277.42
475
29.28
58.57
87.85
117.13
146.42
175.70
204.98
234.27
263.55
292.83
500
30.82
61.65
92.47
123.30
154.12
184.95
215.77
246.60
277.42
308.24
525
32.37
64.73
97.10
129.46
161.83
194.19
226.56
258.92
291.29
323.66
550
33.91
67.81
101.72
135.63
169.53
203.44
237.35
271.25
305.16
339.07
575
35.45
70.90
106.34
141.79
177.24
212.69
248.14
283.58
319.03
354.48
600
36.99
73.98
110.97
147.96
184.95
221.94
258.92
295.91
332.90
369.89
625
38.53
77.06
115.59
154.12
192.65
231.18
269.71
308.24
346.77
385.30
630
38.82
77.65
116.47
155.30
194.12
232.94
271.77
310.59
349.42
388.24
650
40.07
80.14
120.22
160.29
200.36
240.43
280.50
320.57
360.65
400.72
675
41.61
83.23
124.84
166.45
208.06
249.68
291.29
332.90
374.52
416.13
700
43.15
86.31
129.46
172.62
215.77
258.92
302.08
345.23
388.39
431.54
725
44.70
89.39
134.09
178.78
223.48
268.17
312.87
357.56
402.26
446.95
750
46.24
92.47
138.71
184.95
231.18
277.42
323.66
369.89
416.13
462.37
775
47.78
95.56
143.33
191.11
238.89
286.67
334.44
382.22
430.00
477.78
800
49.32
98.64
147.96
197.28
246.60
295.91
345.23
394.55
443.87
493.19
825
50.86
101.72
152.58
203.44
254.30
305.16
356.02
406.88
457.74
508.60
850
52.40
104.80
157.20
209.61
262.01
314.41
366.81
419.21
471.61
524.01
875
53.94
107.89
161.83
215.77
269.71
323.66
377.60
431.54
485.48
539.43
900
55.48
110.97
166.45
221.94
277.42
332.90
388.39
443.87
499.36
554.84
Note:
The first column is solar capacity in megawatts, and the first row is the percent local manufacturing of
solar PV technology components. The other values in the grid are corresponding solar manufacturing
jobs (in thousands of Job-Years).
160
Figure 4.8: Effect of Increasing Solar PV Capacity (in MW) and Percentage Local
Manufacturing on Manufacturing Jobs.
A graph of manufacturing jobs at different rates of local manufacturing (1%
through 10%) for various solar PV capacities (400MW, 500MW, 600MW, 700MW,
800MW, and 900MW) based on Table 4.6 is used to analyze further the impact of local
manufacturing. As shown in Figure 4.8 (above), and listed below in Table 4.7, for
every 1% increase in local manufacturing of solar PV for installed capacities of
y = 2466x
y = 3082.4x
y = 3698.9x
y = 4315.4x
y = 4931.9x
y = 5548.4x
-
100
200
300
400
500
600
1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
NU
MB
ER O
F M
AN
UFA
CTU
RIN
G J
OB
S (I
N T
HO
USA
ND
S)
PERCENTAGE LOCAL MANUFUCTURING
400MW 500MW 600MW 700MW 800MW 900MW
161
400MW, 500MW, 600MW, 700MW, 800MW and 900MW there are resultant
increments in manufacturing jobs of 24,660; 30,824; 36,989; 43,154; 49,319; and
55,484 respectively (see Table 4.8 below).
Table 4.8: Manufacturing Jobs per 1% Increase in Local Manufacturing.
Installed Solar Capacity
Manufacturing Jobs per 1% Increase in
Local Manufacturing
400 24,660
500 30,824
600 36,989
700 43,154
800 49,319
900 55,484
These increments translate into 25% increase in manufacturing jobs per 100MW solar
PV installed capacity at a constant rate of local manufacturing.
The above analysis indicates that increasing renewable energy capacity and the
percentage of local manufacturing results in more manufacturing employment. What
this means is that an increased percentage of local manufacturing in the renewable
energy industry can potentially lead to increased renewable energy manufacturing jobs.
4.2.3 Analysis on Water Savings
As shown in Figure 4.9 below, the total consumptive water associated with the
REV scenario between 2015 and 2035 is 54 million cubic meters. This represents
162
about 72% reduction in consumptive water related to the BAU situation which has a
consumptive water use of 280 million cubic meters.
Figure 4.9: Water for Electricity Generation in BAU, SED and REV Scenarios from
2015 to 2025.
The REV scenario requires about 48% less consumptive water compared to the SED
scenario. However, the SED scenario needs 145 million cubic meters of consumptive
water which is a 46% reduction in consumptive water use compared to the BAU
scenario. The reductions in consumptive water use by the REV and SED scenarios
over the BAU scenario is as a result of the effect of energy efficiency improvements
and further additions of renewable energy sources of power generating capacity as
0
154
280
0
91
145
0
54
78
0
50
100
150
200
250
300
2015 2020 2025 2030 2035 2040
TOTA
L C
ON
SUM
PTI
VE
WA
TER
(M
ILLI
ON
M3
)
YEAR
BAU SED REV
163
detailed in the description of these scenarios (see Section 4.1). Energy efficiency
reductions translate into avoided generation capacity installations. This in turn implies
avoided consumptive water.
4.2.4 Analysis on Emissions Reductions
Carbon dioxide (CO2) emissions associated41 with the REV scenario between
2015 and 2035 is 48.50 Gg42 CO2 (as shown in Figure 4.10 below) and is the lowest
compared to the SED and BAU scenario. The REV CO2 emissions is about 83% less
than that from the BAU situation (which is 282.16 GgCO2) and about 37% less than
that of the SED scenario (177.29 GgCO2).
41 Emissions estimates are only indicative and for the purpose of comparative analyses.
42 Gg is a unit of mass equal to 1,000,000,000 grams (= 109 g).
164
Figure 4.10: Carbon Dioxide Emissions Associated with BAU, SED and REV
Scenarios from 2015 to 2035.
The drastic drop in CO2 emissions from 282.16 GgCO2 in the BAU scenario to
48.50 GgCO2 in the REV scenario is due mainly to two factors; 1) a relatively higher
energy efficiency improvement in the REV situation (higher than even that of the SED
scenario), and 2) relatively more renewables in the REV scenario (than even the SED
scenario).
4.2.5 Analysis of Energy Efficiency
Ghana’s energy efficiency measures which current involves labeling and
information campaigns towards reducing energy consumption from air conditioners,
lighting (CFL and incandescent) as well as from refrigerators, and refrigerator-freezers
is reflected in the BAU scenario (see Section 4.1.2) . Contrasting the BAU and the
0
104.78
282.16
0
68.56
177.29
0
40.73 48.50
0
50
100
150
200
250
300
2015 2020 2025 2030 2035
CU
MU
LATI
VE
CO
2 E
MIT
TED
(G
G)
YEAR
BAU SED REV
165
other scenarios (SED and REV) against an entirely unchecked (that is with zero energy
efficiency rate) scenario of 7% annual power capacity demand is shown in Figure 4.11
below. The unchecked situation is projected to reach a demand power capacity of
about 11,000 MW by 2035.
However, an autonomous energy efficiency improvement (AEEI) of 0.5 % per
annum assumed in the BAU scenario to account for existing energy efficiency
measures is projected to result in about 5% and 7% reduction in projected demanded
capacity addition from 2015 to 2025 and 2025 to 2035 respectively. The AEEI
assumed in the BAU scenario effectively translates into a 3.2 % reduction over
Figure 4.11: Projected Unchecked Electricity Capacity Growth Compared with
Scenarios (BAU, SED, and REV) with Energy Efficiency Improvements.
-
5
7
-
10
14
-
14
20
-
5
10
15
20
25
2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035
ENER
GY
EFFI
CIE
NC
Y (%
)
YEAR
BAU SED REV
166
unchecked projected capacity from 2015 to 2035 and results in total electric power
savings of 524 MW over the unchecked situation during the projected period.
Projected 1% annual energy efficiency improvements in the SED scenarios
culminates into 10% and 14% reductions in projected capacity from 2015 to 2025 and
2025 to 2035 respectively. These reductions of 10% and 14% translate into a net
decrease of 6.2% over the unchecked scenario between 2015 and 2035. The net energy
efficiencies from 2015 to 2035 for the various scenarios are shown in the energy
efficiency grid below (see Table 4.9).
Table 4.9: Net Energy Efficiency Improvements Grid for BAU, SED and REV
scenarios (over the period 2015 to 2035).
Unchecked BAU SED REV
BAU 3.2 0.0 N/A N/A
SED 6.2 3.0 0.0 N/A
REV 8.9 5.7 2.7 0.0
The net energy efficiency of the of the REV scenario over the unchecked capacity
growth situation is 8.9% reduction; and that over the BAU scenario is 5.7% (as listed
in Table 4.9).
167
Calculation of energy efficiency jobs is based on an approach used by Rutovitz
(2012)43 which estimates direct employment from energy efficiency measures, based
on a study by Ehrhardt-Martinez and Laitner in 2008 of the U.S Energy Efficiency
Market. Data used by Ehrhardt-Martinex and Laitner to obtain employment factors
(employment /GWh) is shown below in Table 4.10.
Table 4.10: Employment from Energy Efficiency Investment in the USA, 2004.
Residential Commercial Industrial Utilities
Jobs/million $ 8.1 5.9 4.2 8.8
Investment (in billion $) 5.9 7.7 10.6
Energy Savings (in
GWh) 96,713 73,268 43,961 71,8024
Employment /GWh 0.49 0.62 1.01 0.03
Using the employment factors obtained in Table 4.10 and sectoral split of energy
efficiency (based on data on sectoral consumption of electricity in Ghana) shown
below in Table 4.11, a weighted average energy efficiency employment factor of 0.45
jobs per GWh was obtained (see Table 4.11).
43 Due to lack of data Rutovitz (2012) used this approach to estimate energy efficiency
employment factors in South Africa, this study also uses this approach in estimating
energy efficiency employment factors for Ghana.
168
Table 4.11: Sectoral Split of Energy Efficiency Gains Used in Computing the
Weighted Average Employment per GWh for Ghana.
Residential &
Commercial Industrial
Export/Bulk
(Utility)
Weighted
Employment
per GWh
Sectoral Split of
Energy Efficiency 70% 20% 10%
Employment/GWh 0.56 0.27 0.03 0.45
NB: The sectoral split of energy efficiency is based on the proportions of sectoral
electricity consumption in Ghana.
Estimated employments created by energy efficiency measures for the scenarios (BAU,
SED, and REV) based on a weighted average of 0.45 employment per GWh obtained
in Table 4.11 (as shown below in Table 4.12) indicates that the more the energy
efficiency improvement, the greater the energy efficiency jobs created.
Table 4.12: Energy Efficiency Jobs Created from the BAU, SED and REV Scenarios
(2015 to 2035).
BAU SED REV
Total Savings (MW)
523.89
1,015.36
1,476.33
Total Savings (GWh)
4,589.25
8,894.54
12,932.64
Employment (Jobs)
2,051
3,976
5,780
4.3 Cost Estimates of Capacity Additions in Scenarios.
Estimates of total capital cost, fixed O&M cost, and fuel cost for each of the three
scenarios (taking into consideration the time value of money) to cover projected
electricity demand from 2015 to 2035 are presented in this section. Cost data used in
169
estimating the capital cost, O&M cost, and fuel cost associated with each of the
scenarios is shown below in Table 4.13.
Table 4.13: Data on Cost of New Electricity Generating Technologies.
Technology
Total Overnight
Capital Cost in
2014 (2013
US$/kW)
Fixed O&M Cost
(2013
US$/kW/yr.)
Fuel Cost
(in 2015 US$)
Advanced Gas/Oil Comb
Cycle
1,017
15.36
$8.84/MMBtu
Coal-Gasification
Integrated Comb Cycle
(IGCC)
3,727
51.37
$58.14/Metric
Ton
Wind (Onshore) 1,980 39.53
Solar PV 3,279 24.68
Notes on Table 4:13.
Overnight capital cost44 includes contingency factors, excludes regional
multipliers and learning effects. Interest charges are also excluded. These
represent costs of new projects initiated in 2014 (U.S EIA, 2015).
Advanced Gas/Oil Comb Cycle generation technology is assumed to run on
natural gas.
Cost of natural gas ($8.84 MMBtu) used is based on estimated gas from
Ghana’s Jubilee gas for 2015 (Energy Commission, Ghana, 2015). This was
assumed in this study as constant for the period of analysis (2015 to 2035).
Cost of coal is the average cost of coal export from South Africa in 2015 (from
January to October) (Quandl, 2015). Capital costs and O&M costs are from U.S
Energy Information Administration (U.S EIA, 2015).
Coal and natural gas power generation technologies are regarded as more mature
technologies; for these technologies, it can be assumed that capital costs and fixed
O&M costs could remain stable in real terms over time. However, for wind power and
44 Overnight cost is the cost of construction if no interest was incurred during
construction, as if the project was completed "overnight."
170
solar PV, which can be regarded as emerging technologies, the capital costs of these
technologies are expected to decline as these technologies continue to mature.
Table 4.14: Capital Cost, Fixed O&M, and Fuel Cost at the End of 2035 Estimated at a
Real Discount Rate45 of 10% for all Three Scenarios.
Scenarios Differences
Costs REV SED BAU REV-BAU SED-BAU
Capital Cost (in 2013 Billion US $)
24.80
19.10
27.01
(2.21)
(7.91)
Fixed O&M Cost (in 2013 Billion US $)
0.71
0.13
0.26
0.45
(0.13)
Fuel Cost (in 2013 Billion US $)
3.11
5.47
5.68
(2.57)
(0.21)
Note on Table 4.14:
Fixed O&M cost and fuel cost are for the period 2015 to 2035.
The cost of coal and natural gas (as used from table 4.13) are assumed constant
in estimating fuel cost.
The estimates (as shown in Table 4.14) provide an assessment of the costs of
the renewables dominated energy pathways (SED and REV) relative to the BAU case
by computing the differences in total capital cost, fixed O&M cost, and fuel cost. The
total estimated capital cost for the BAU scenario (which is dominated by fossil fuel
resources) is comparatively the most and this is due to the fact that the BAU scenario
has the highest installed capacity (compared to the SED and the REV scenarios which
45 There are different views on what the social discount rate in practice should be. Low
discount rates are often used in environmental, and climate-related applications and
usually for long-term endeavors. International multi-lateral development banks
(including the Asian Development Bank, the African Development Bank, and the
European Banks for Reconstruction and Development) have used rates of 10-12%,
however, there have been situations where social discount rates have been lower
(Harrison, 2010).
171
are less due to assumed higher efficient energy use measures). Capital cost for the SED
scenario is lower relative to the REV scenario. This is partly as a result of the reduced
installed capacity in the SED scenario compared to the BAU scenario as well as
assumed heavy dependence of natural gas generating technology as compared to much
more renewables (of solar and wind) in the REV case. Total fuel cost over the period
(2015 to 2035) decreases in the order of decreased capacity of conventional technology
in the scenarios; BAU, SED and REV respectively.
Conventional power generation based on fossil sources of fuels such as oil,
coal, and gas deliver steady state energy generation, however, in reality, these cost will
be variable and increasing due to volatile cost of the fuels. Fossilized based power
sources are also with much more additional burdens/cost of emissions and pollutions.
On the other hand, renewable sources of electricity such as wind and solar though are
intermittent generators, have quite fixed costs which are expected to decrease into the
future as these technologies mature. Additionally, renewables have less or no carbon
emissions, and for that matter would have less environmental and social cost.
172
Chapter 5
DISCUSSIONS AND POLICY RECOMMENDATIONS
Chapter Four of this study quantitatively analyzes the benefits of renewable-
dominated electricity pathways (combined with energy efficiency targets) over a
conventionally-dominated electricity pathway for Ghana into the future in terms of
jobs creation, carbon dioxide emission reductions and potential reduction in water
associated with power generation. Chapters Two and Three review barriers to
renewable energy and energy efficiency deployment (both general and specific to
Ghana). These same Chapters (2 and 3) review (in general and specific to Ghana and a
number of countries in Africa) policies for spurring renewable energy deployment and
energy efficiency improvements. Using the information, findings and deductions from
these previous Chapters, this chapter revisits and discusses the research questions of
this study (as stated in Chapter 1 and) re-stated below;
1. What are the potential socioeconomic and environmental benefits of renewable
energy development in Ghana?
2. What are the potential socioeconomic benefits of energy efficiency improvements
in Ghana?
3. What policies can be used to promote a large proportion of renewables in the
electricity generaiton mix of Ghana?
This chapter also offers and discusses policy suggestions specifically for the case of a
large proportion of renewable energy technology deployment in Ghana.
173
5.1 Potential Benefits of Renewables in Ghana
Regarding the economic benefits of renewable energy relative to conventional
sources of energy, this study’s results on the analysis of direct employment creation
collaborates other research findings in the literature that renewable energy deployment
creates more jobs comparatively. Additionally, findings from this study (in Section
4.2.3) signal that water use for energy production and electric power generation is far
less in a situation when the country’s fuel mix for electricity is dominated by
renewable sources of energy. Also, this study has demonstrated that CO2 emissions
would be substantially reduced in a renewable electricity dominated generation
situation relative to a fossil fuel dominated situation. These direct, as well as other
related environmental and socioeconomic potential benefits of large deployment of
renewables in Ghana, are discussed in details below.
5.1.1 Economic
The estimated total potential of direct employment of 126,178 (which
excludes energy efficiency jobs) between 2015 and 2035 from the REV scenario is
about 42% more jobs relative to the BAU scenario (see Figure 4.7 and Table 4.6) is
indicative that, relatively more direct jobs would be created in the energy sector of the
Ghanaian economy if such large proportions of renewable energy technologies were
deployed compared to deploying additional conventional-fossilized system. It follows
therefore that, more jobs from renewable energy deployment in the Ghanaian economy
174
would lead to more indirect and induced46 jobs in the country if more renewable
energy technologies are deployed instead of conventional energy technologies.
The analysis on construction jobs (in Section 4.2.1) indicates more construction
and installation jobs with large proportions of deployed renewables situation than with
large proportions of conventional energy. Construction and installation employments
are considered as short-term jobs; that is, they occur during the
construction/installation period only. However, if there are more distributed renewable
generation (such as rooftop solar PV) and deployment is spread over the years, then
construction and installation jobs would also be distributed over the years of renewable
capacity deployment in the country. Analysis of operation and maintenance (O&M)
jobs in this study supports the notion that there are more O&M jobs with large-scale
renewable energy technology deployment than with the large-scale conventional
energy deployment situation.
The potential operation and maintenance jobs (shown in Figure 4.8, Table 4.12
and Figure 4.11) are expected to be sustained over the lifetime (20 to 30 years or more)
of the energy systems. As well as the economic impacts associated with local
46 “Indirect jobs generally include jobs in secondary industries which supply the
primary industry sector, which may include, for example, catering and
accommodation, while induced jobs are those resulting from spending wages earned in
the primary industries (renewable energy industry). Indirect and induced jobs are
usually calculated using input-output modelling.” (Rutovitz & Harris, 2012 pp.1).
Rutovitz and Harris (2012) noted that the inclusion of indirect employment to direct
jobs usually increases direct job numbers by 50% - 100%, while the inclusion of
induced jobs could increase job numbers by 100% – 350%.
175
purchases of the necessary equipment, materials and services to keep the installed
systems operating. In this regard, the deployment of more renewable energy
technologies in Ghana with a strong emphasis on local value creation through local
content requirement policy/strategy would mean more of manufacturing jobs and local
procurement47. This is because, large proportions of renewable energy technology
deployment with local content requirements in Ghana would unlock ample
opportunities for creating local skilled jobs along the renewables value chain (of
manufacturing, construction and installation, and operation and maintenance) in the
country. This could possibly spur the country on to become a renewable energy
technology hub in the ECOWAS sub-region.
Being dependent on the sun and the wind respectively, solar PV and wind
power require no fuel costs. The zero-fuel-cost aspect of these renewable technologies
(of solar and wind) play signifcant role in the overall cost of electricity generation from
renewables over the medium to long-term. This would reflect postitively on the total
overall cost of the REV and SED scenarios relative to the BAU scenario in the longer
term. Fossil fuel-based electricity sources of coal and natural gas have considerable
downstream costs, such as impacts on the environment and climate. With regards to
47 Aside the proposal/prospect of local manufacturing of solar PV panels through
foreign direct investment in Ghana discussed in Section 2.1.1 of this study, the country
has the prospect of scaling up local production of wind turbines and balance of system
components for solar PV when local content is incorporated into and emphasized in
renewable energy policies.
176
climate change regulatory efforts, a number of countries have introduced (or have
considered introducing) market-based mechanisms such as carbon taxes or cap-and-
trade systems as a way of limiting GHG emissions (Hahn and Ritz, 2014). However, in
the absence of such market-based mechanisms in countries such as Ghana, putting a
monetary value on CO2 reductions would contribute to shading light on analyses of
energy policy-making with respect to GHG emissions. However, due to the
uncertainties over what the right social cost of carbon48 (SCC) should be analyses
based on the metric of SCC are often debatable.
5.1.2 Environmental
The SED and REV scenarios show reductions in carbon dioxide (CO2)
emissions of 37% (104.87 GgCO2 less) and 83% (233.66 GgCO2 less) over the
projected BAU scenario respectively (from 2015 through 2035). These reductions in
CO2 emissions are indicative of the environmental benefits potential obtainable by
Ghana should the country deploy such large proportions of renewables (solar and
wind) in its electricity generation mix. By inference, the level of reductions in CO2
emissions is also indicative of proportions of potential reductions in other pollutants
such as particulate matter49 (PM 2.5), nitrous oxides (NOx), sulfur dioxide (SO2),
48 The social cost of carbon (SCC) is generally defined as the net economic damage
(overall cost minus overall benefits, accumulated over time, and discounted) of a
metric ton, of CO2 produced.
49 PM2.5 is air pollutant consisting of tiny particles in the air (that are two and one half
microns or less in width) that reduce visibility and cause the air to appear hazy its
177
carbon monoxide and methane associated with coal, oil and natural gas for
thermoelectric power generation.
With large proportions of renewables deployment in Ghana, there would be
reduction in such climate-change related and adverse health affecting gasses and
substances – as these would be avoided, reduced or eliminated. Also, the adverse
impacts of air pollutants on human health and ecological health would be reduced or
avoided. Improved environmental and human health in the country would translate into
reduced expenses on health. Also, healthier Ghanaian workers would be a boost for
national economic productivity and social well-being.
Additionally, consumptive water saved through deploying a large proportion of
renewables can be used by other sectors of the Ghanaian society and economy;
especially in the production of portable water since currently there is inadequate supply
of water to households and industries in the country. Another area of water use where
water savings from thermoelectric power generation can benefit from in the country is
the agriculture sector; for irrigation purposes and animal husbandry. The co-benefits of
renewables deployment – of water savings and reduction in CO2 emissions – would
promote sustainability within Ghana’s energy-water-pollution nexus. Thus, large
proportions of renwablees in Ghana’s generation mix demonstrates, and therefore
promises a synergistic benefit for the country within the energy-water-pollution nexus,
when levels are elevated. Outdoor PM2.5 levels are most likely to be elevated on days
with little or no wind or air mixing (Department of Health, 2011).
178
as the quantity of water required for electric power generation and the pollution
associated would be reduced substantially.
In the last 30 years, a 1oC increse in temperature has been observed over
Ghana. This temperature rise has been accompanied by periodical hydrological
droughts within this period leading to reduction of the water levels in the country’s
dams for hydropower generation (WRI-CSIR, 2000). The country’s water resources
are at further risk and cannot therefore be depended upon for hydropower generation
into the future and also for thermoelectric cooling as well. Deploying more renewable
energy technologies such as wind and solar (which do not require water for generation
or cooling and do not emitted GHGs, as demonstrated through the scenario analyses of
this study will benefit the country in mitigating the water-energy-climate interrelated
risk that the country faces even now and into the future.
5.1.3 Energy Security and Social Equity
A decentralized renewables deployment model which enables the participation
of a diverse group of stakeholders including prosumers with a strong focus on local
value creation in providing energy for the owners’ consumption and with the prospect
of selling the surplus to the grid would not only be economically and environmentally
beneficial, this would also promote social equity in many ways. The opportunity to
freely and actively participate in one’s own energy issues in Ghana would promote
179
what is usually reffered to as “energy democracy.”50 The emergence of a decentralized
renewable energy regime would promote active and direct participate of Ghanaians in
the energy industry. It would also offer Ghanaians the opportunity to become active
participanats rather than be passive recipients of regulated electricity from a renewable
power generation approach that is only centralized.
5.2 Policy Suggestions towards Sustainable Energy Deployment in Ghana
This study suggests three concrete policy measures towards modifying and
expanding the renewable energy framework of the country towards a scaling-up of
renewables deployment. These recommended policies are listed below and discussed in
the subsections that follow:
A hybrid REFIT-RPS strategy; by which an RPS establishes the country’s
overall long-term renewable energy policy objectives; including a
deployment target; with a solar carve out (differentiated for prosumers and
utility scale generation). Inclusion of local content requirement in utility-scale
deployment towards value creation;
Setting a national energy efficiency improvement target, and specific sector
policies including industrial energy efficiency policies;
The use of local content requirements (LCRs) as a pre-requisite for large-
scale renewable energy projects undertaken by IPPs in the country who
50 The term “energy democracy” is often used to refer to individual or community
ownership of energy assets as an alternative to utility ownership (IEA-RETD, 2014)
180
receive financial support (tax exemptions, credits, FIT payments, etc.) from
the government of Ghana. Such LCRs would enhance additional local
benefits from increased renewable energy deployment; and
Implementation of strategies towards supporting the emergence of electric
power prosumers (towards a departure away from the country’s conventional
utilities).
5.2.1 A Hybrid REFIT-RPS Policy Strategy
Towards a large scale national renewables deployment - with a large proportion
of prosumers - this study suggests that Ghana revamps its renewable energy policies of
FIT and RPS. By setting sectoral (residential, commercial and utility) differentiated
FITs and correlating these FITs towards meeting a more aggressive RPS policy (with
particular sectoral quotas/targets and technology set-asides) in a formulated hybrid
“renewable energy feed-in-tariff and renewable portfolio standard” (REFIT-RPS)
policy design.
Structurally, the RPS component of the REFIT-RPS hybrid policy should be
formulated to state specifically, what the country would seek to achieve in the long-
term. The overall RPS component should be quite ambitious and broken down into
short-to-medium term targets with sector quotas and technology carve out targets
spelled out clearly. In this way, the RPS component of the REFIT-RPS hybrid policy
would offer aspirational clarity and regulatory accountability through a well-detailed
target that can foster high rate of deployment of renewable energy technologies in the
country. In order to have an ambitious but also realistic RPS component, the RPS
181
planning process would need to take into consideration the country’s exploitable
renewable energy potential and the potential sustainable developmental benefits
obtainable.
Structurally and operationally, the FIT component of the REFIT-RPS hybrid
policy proposed by this study for Ghana would act as a tool to drive the purchase of
renewable electricity generated and for that matter renewables deployment. In this
way, the FIT component of the hybrid policy would be directed towards meeting the
country’s RPS target in the REFIT-RPS hybrid policy. In this regard, the FIT policy
component would need to have tariffs set in such a way that they can correspondingly
drive the market demand for renewables towards meeting the targets established in the
RPS component of the hybrid policy in an efficient manner.
The concept of combining RPS and FIT policies is not new; it has been
presented, discussed and debated by many including; Cory et al. (2009); Trabish
(2014) and Davies (2015). Currently, countries in the European Union (EU)
implementing FITs are in a way employing a kind of REFIT-RPS hybrid policy. This
is because some EU countries are using their FITs to drive implementation of
renewables towards meeting their respective EU quotas (RPSs) (towards the total EU
renewables mandate of 20% by 2020). In his writings on “Reconciling RPS and FITs”
Davies, (2012) noted that RPS and FIT policies fundamentally have the following
similar underlying objectives; (1) to deploy renewables, (2) to change the mix of
technologies used to produce electricity, (3) to keep consumer prices down, (4) to keep
transactional costs down, and (5) to limit policy administration costs (Davies, 2012).
182
Table 5.1: FIT and RPS Policy Virtues and Design Traits.
Source: (Davies, 2012).
RPS and FIT policies have their unique design traits that pushes each of them towards
achieving a number of specific policy goals in the pursuit of a common objective of
promoting renewable energy technologies (Davies, 2012). The policy virtues inherent
Policy Virtue FIT RPS
Efficacy
Development of
Renewables:
Amount
Price level,
Program Cap,
Resource
Eligibility,
Project size, and
eligibility.
Percentage target,
Grandfathering limits, Credit
multipliers, Resource
eligibility, and Jurisdictional
breadth.
Development of
Renewables:
Assurance
Purchase
obligation,
Interconnection
obligation.
Interim percentage targets, Cost
recovery assurance,
Compliance measurement
(energy vs. capacity), Planning
and compliance reporting
requirements, Grandfathering
limits, Geographic eligibility.
Technological
Diversification
Differentiated
tariffs.
Resource carve-outs
(technology-specific targets),
Resource tiers, Credit
multipliers.
Efficiency
Price Impact
Minimization
Price level,
Pricing
structure.
RECs, Cost caps, Alternative
compliance payments.
Transactional Cost
Minimization
Standardized
contract terms.
Bidding procedure
requirements.
Administrative Cost
Minimization
Tariff duration.
Alternative compliance
payments, Planning and
compliance reporting
requirements.
183
in the design of FIT and RPS policies in terms of their efficiency and efficacy are
presented in Table 5.1 above.
Substantial redundancies exist in combining RPS and FIT policy designs as
some features end up being duplicated because of the way these two policies are
framed. However, in an attempt to enable the creation of a more efficient kind of
hybrid legal instrument, Davies (2012) eliminated the redundancies by isolating those
elements of RPS and FITs that are better at promoting various components of
renewable energy technologies. The comparative advantages of RPS and FIT towards
eliminating redundancy when the two policies are combined are presented in Table 5.2
below.
Table 5.2: Comparative Advantages of FIT and RPS policies (Davies, 2012).
Policy Virtue FIT RPS
Efficacy Development of Renewables:
Amount
*
Development of Renewables:
Assurance
*
Technological Diversification * *
Efficiency Price Impact Minimization * *
Transactional Cost
Minimization
*
Administrative Cost
Minimization
*
184
A merged RPS and FIT with a design focus on the strengths of each of the two policies
offers a more effective and efficient hybrid policy than either the RPS or FIT on its
own would.
For Ghana, such a hybrid RPS-FIT policy would offer very important
synergistic policy opportunities towards a large-scale renewables deployment. These
synergies include the following;
a) A hybrid REFIT-RPS would be able to target a boarder audience/stakeholders
than either of each policy would on its own. Incentive prices for residential,
commercial/industrial and utility-scale consumers would attract a broader
ownership of renewable energy systems. At the same time, utilities or suppliers
can be made to become subject to targets through the RPS.
b) A combined policy in which the FIT is used as the implementation mechanism
or tool in harnessing the RPS would relay a stronger signal to the electricity
market of the government of Ghana’s intentions and commitment to promoting
renewable energy technologies. A well-designed REFIT-RPS would make
185
clear renewable energy implementation efforts. It would also make noticeable
whether progress towards goals is being made or not.
In principle therefore, the use of RPS and FIT in tandem; in the form of a hybrid policy
would potentially lead to harnessing the regulatory synergies that may otherwise not be
achieved by implementing either one (Cory et al., 2009) (Davies, 2012).
5.2.2 Promoting Prosumers within the RFIT-RPS Hybrid Policy
The following rules and regulations would greatly complement the effective
implementation of a hybrid REFIT-FIT policy as prospoed in this study towards
supporting renewable energy prosumers in Ghana.
a) The introduction of interconnection rules that are streamlined to allow small
residential and commercial systems to be quickly reviewed and connected to
the grid of they meet certain technical requirements. As well as instituting a
minimized or eliminated interconnection application and review fees for such
small scale systems, especially for residential customers.
b) The introduction of tax credits for customers who invest in renewable
electricity to incentivize higher penetration - especially for rooftop solar PV51.
51 A number of characteristics of Solar PV make it more suitable for prosumers and
this is leading to the emergence of solar PV prosumers globally. Some of these
characteristics include sustained double digit growth in PV deployment globally, rapid
decline in PV costs, and the fundamental decentralize nature of solar PV systems (IEA-
RETD, 2014).
186
Additionally, the promotion of energy prosumers in the power sector of Ghana
will depend on a number of factors or influences that attract individual, businesses,
companies, to invest in renewables. A number of these factors which the government
of Ghana can put in place are listed below:
Packages of renewable energy deployment projects (technically and
economically) should be designed, built and implemented where possible
around existing business applications so as to generate local involvement,
potential profits, and therefore interest in maintaining such renewable
energy systems.
Tariffs would need to be managed in such a way that there exist the right
balance between commercial viability of owning a system and electricity
consumers’ ability and willingness to pay. This would entail setting
appropriate tariffs (i.e. the right electricity consumption tariffs and FITs)
such that owners of renewable energy generating systems would at least be
able to cover the O&M, and replacement cost of their systems.
In addition to maintaining the right tariffs, smart incentives such as
investment tax credits or production tax credits and/or subsidies can be
used to support investments in or production of renewable energy.
The emergence of renewable energy prosumers in Ghana would unlock more
benefits for local value addition in the country. A report by the International Energy
Agency (IEA) noted that prosumer ownership of renewable energy systems leads to
more local economic benefit compared to larger systems that are more likely to attract
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out-of-state project developers and engineering, procurement, and construction firms
(IEA-RETD, 2014). This is because, prosumers who own their systems can realize the
full value of the system for themselves, and this can have a greater local economic
multiplier effect than systems that are owned and operated by non-local developers
(IEA-RETD, 2014). The emergence of electric power prosumers in Ghana has the
potentially to significantly contribute socioeconomically to the country in a number of
ways. Industrial prosumers will enhance inclusiveness of industrial development. The
opportunity of self-supplied low-cost energy options would allow for local households
in rural communities to maximize their productivity and add increased value to their
existing products. Promoting prosumerism in Ghana can also give rise to decentralized
energy systems providers, fostering entrepreneurship in new sectors and skilled
employment creation.
Additionally, prosumer ownership of renewable energy systems would help to
some degree with the deferment or avoidance of distribution and transmission capacity
expansion as power generated onsite by prosumers can delay, avoid or minimize
investment in transmission and distribution capacity. Also with increased penetration
of prosumer ownership, system losses associated with the country’s electricity
transmission and distribution as a result of inefficiencies in the system could be
reduced.
5.2.3 Energy Efficiency Policy Recommendations
To be able to sustain the gains made in energy efficiency in Ghana and also to
improve on that into the future, this study recommends that the country set a national
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energy efficiency target. An energy efficiency goal for the country would raise more
awareness of energy efficiency and also pave the way for expanding energy efficiency
policy in the country. In Ghana, there exist opportunities for expansion of mandatory
energy efficiency performance (MEP) standards. MEP standards should be extended to
include a number of strategically chosen products such as office equipment (imaging
equipment, computers, etc.) and in sectors such as residential and industrial sector
energy use (for space conditioning, boilers, furnaces, ventilation fans, clothes washers,
etc.)
The following policies can be incorporated as part of a national energy
efficiency target designed; 1) a public sector energy-efficiency procurement
requirement document, and 2) industrial energy efficiency programs. These would
further unleash the potential for energy savings in the public and private sectors of the
Ghanaian economy. These would result in savings for the government of Ghana and
businesses in the country millions in energy cost in addition to avoided carbon dioxide
emissions, and improved livelihoods.
Though government agencies in Ghana are required under existing energy
efficiency policies to purchase energy-efficient air conditioners and refrigeration
appliances, there are opportunities for inclusion of other products. A national energy-
efficiency procurement guidelines or legislation would be an effective means to
implement a public energy efficiency program. Such a national energy efficiency
procurement guidelines or legislation should clearly specify requirements for
municipalities to comply with. The successful implementation of such a purchasing
189
program in Ghana would require a high-level political endorsement, supported by
motivated municipal leaders and trained purchasing officials. The government’s
actions to further promote energy efficiency in the public sector would be a good
examplary leadership effort that can stimulate the market demand for energy efficient
products and services and this can be a way to trigger domestic supplies of energy
efficiency resources in the country at competitive prices once the public sector has
established a reliable entry.
A study on industrial energy efficiency management in Ghana by Apeaning
(2012) revealed that in general, there is an energy efficiency gap resulting from a low
implementation of energy efficiency measures in the country’s industrial sector. For a
successful industrial energy efficiency programming and implementation, the
government of Ghana would need to put in place among other things an industrial
energy efficiency framework as established by the United Nations Industrial
Development Organization (UNIDO) (McKane, et al. 2008); This would need to
include the following:
a) energy efficiency target-setting agreements;
b) energy management standards;
c) system optimization training and tools;
d) capacity-building to create system optimization experts, now and into the
future;
e) a system optimization library to document and sustain energy efficiency gains;
and
190
f) tax incentives and recognition.
5.2.4 Departure from Conventional Utilities
The realization of the idea of a large base consumer-owned renewables
(particularly for solar PV), and a high energy efficiency improvement future in Ghana
would require a shift away from the heirachical, unidirectional contemporary energy
system which is supply oriented and based mainly on centralized generation. Making
such a shift would require the thinking and application of principles outside the ways
of the conventional utility. It would require the application of sustainable energy
practices based on the tenets of a “Sustainable Energy Utility” (SEU)52 model of
development.
The suitability of the SEU model for a decentralized customer owned
renewables and energy efficiency measures stems from the fact that the SEU model is
free from the biases of the centralized paradigm of power generation and the conflict
such centralized electric power utilities would usually have with customer based
generation. . The SEU model aims at achieving a shift from carbon-intensive energy
sources and centralized energy architecture to demand-oriented energy architecture.
The SEU model therefore gravitates towards energy as a service provision (rather than
52 The SEU model was developed at the Center for Energy and Environmental Policy
by Dr. John Byrne and his team towards an energy-environment-society relations that
embodies Amory Lovins’ promise of the negawatt and the philosophical principles of
Amulya K. N. Reddy’s DEFENDUS (Byrne, et al. 2009).
191
as a commodity), reliance on savings and environmental benefits, affordability and
local economic impact (Byrne, et al. 2014) (Houck & Rickerson, 2009).
Under the existing energy system in the country, interaction between the
general public (power consumers) and electric power utilities is limited to a pattern of
consumption and the payment of monthly bills. The SEU strategy on the other hand,
would reconnect the general public into a more participatory engagement, where the
people of Ghana (Ghanaians of all walk of life) will have the opportunity to become
producers as well as consumers of electric power. For that matter, the SEU model is
guided by the participation of civil society, and it functions through a not-for-profit,
independent entity (that functions outside the tenets of the conventional utility) towards
achieving energy sustainability. These, therefore, makes the SEU development model
capable of fostering equity.
5.2.4.1 How is Ghana’s Renewable Energy System Transition to Take Place?
The Ghanaian electric power sector has experienced some major changes over the last
couple of decades. One such change has been the introduction of thermal power
generation capacities (powered mainly by natural gas and oil) to augment the previous
predominately large-hydro power generation capacities. The production of Ghana’s
own natural gas makes viewing natural gas power generated electricity a more reliable
and viable option for the country. In terms of near-term energy security, it can be said
that it makes sense for the country to depend on natural gas supply of its own as well
as on what is imported into the country. Natural gas for Ghana in this way can
potentially fuel electricity generation towards meeting the country’s present much
192
needed additional generation capacity. Compared to coal, natural gas power
generation emits about half less the quantity of carbon emitted when coal is burned for
power generation. This should environmentally qualify natural gas as a preferred fuel
for power generation in the country, as the country takes time to ramp-up its
renewables.
While the dependence on natural gas for electric power generation in Ghana
can potentially provide quite significant short-term environmental and economic
benefits, as well as energy security, strong evidence suggests that becoming too reliant
on natural gas for power generation into the future could pose numerous and complex
risks for the country’s power sector in a number of ways. Some of these are listed
below;
Persistent price volatility of natural gas in the future can jeopardize the
country’s conventional based power generation system,
Rising national (as well as global) warming emissions suggest long-term use
and expansion of power generation based on natural gas is not environmentally
benign.
The non-renewability of natural gas means that the country could begin
experience inadequate supply from its domestic sources. Also, the country’s
previous experiences of erratic supply of imported natural gas into the county
are all indicative that natural gas may not be a sustainable long-term option into
the longer future.
193
The risk of overdependence on natural gas can be overcome by introducing and
promoting more renewables at all levels, particularly at the commercial and residential
scale through decentralized renewables deployment.
Enabling customer-sited renewables in Ghana would enhance the active
participation of consumes and this would help change consumers view of energy from
it being a “utility” (that will have to be provided to them by the government at all
times) to viewing energy as a “product or service” of which they are all active
participants in making decision on; including being able to provide it for themselves.
Houck & Rickerson (2009) noted that usually under the conventional energy system, it
is difficult to engage “passive” end users to have behavorial changes. This implies that
the promotion of energy prosumerism through decentralized renewables generation can
potentially contribute to more sustainable partterns of energy consumption leading to
expansion in energy efficiency in the country’s power supply and use.
Renewable energy technologies are already ramping up quickly in many parts
of the world and the fact that it has been demonstrated that these technologies can
render affordable, reliable, and low-carbon power, is indicative that putting in place
functional policies can enable them to flourish in Ghana as the country tries to find
ways and means to meet its current power supply shortages.
Transitioning from a predominantly centralized energy system to one with the
inclusion of significant distributed or decentralized renewables is something Ghana
cannot afford not to do given the holistic potential sustainability benefits that the
country stands to gain from in doing so. In reality, renewables should not necessary be
194
seen as being more expensive because the true cost of energy in Ghana has not in the
past been fully passed on to consumers. More so, the external cost of fossil fuels
(externalities) are usually not included in the cost of electricity. Strategic plans such as
periodic upward reviews in electricity tariffs that seek to gradually correct such
inefficiencies in electricity costing and pricing have the tendency of enhancing the
competitiveness of renewables in the country. Also, into the future, the cost of
conventional energy based on fossil fuels would continue to be volatile in an
unpredictable manner, whiles the cost of renewables would continue to drop. These
would enable renewables to become competitive on their own; without much policy
support.
The establishment and operation of Ghana’s renewable energy fund with clear
and reliable operating schemes geared towards supporting renewables; including
customer-based distributed renewables generation will play a crucial role in the
transition into incorporating prosumer-based renewables into the generation mix.
Private financing schemes for renewables would also need to be encouraged for the
same purpose and reasons.
5.2.4.2 The Role of Mini-Grid and Stand Alone Renewable Energy Systems
Ghana does not have 100% access to electricity. About 70 percent of the
population in the country has access. Yet, extending the national grid to some of the
remaining areas such as rural communities in the country is very much challenged
technically and financially (CIF, 2015). This research therefore recognizes the need for
195
polices and strategies for developing renewables for rural electrification in Ghana
within the scheme of decentralized renewables deployment for the country as a whole.
Off-grid solutions; including mini-grids and standalone solutions that can be
deployed briskly and with ease are viable options for rural communities in the country
where grid extension is very much challenged. While the deployment of off-grid
renewables had been piloted in a number of rural communities in Ghana, expanding
adoption will require a wide array of policy and regulatory measures as well as private
sector participation. Experiences from mini-grid system development through the
“Scaling up Renewable Energy Program” (SREP)53 in developing counties in Africa
suggest that a number of factors (CIF, 2014) would be important for scaling up
renewables in a mini-grid setting in Ghana. These factors include:
The design of mini-grid systems should take into consideration local context
and content, including socio-economic conditions, available energy (renewable)
resources, and human capital conditions;
Design and efficient implementation of a well-structured and robust financing
model that adequately meets operational, maintenance, and management cost is
need to facilitate scaling up;
53 The CIL (Climate Investment Fund)’s program of Scaling Up Renewable Energy in
Low Income Countries Program (SREP) under the Climate Investment Funds, mini-
grids offer a promising solution for providing energy access to rural communities
196
Support form appropriate national institutions and policies that effectively
incorporate the interests of relevant stakeholders would be needed.
Taking the above factors into consideration in implementing Ghana’s Climate
Investment Fund supported SREP- renewable energy mini-grids and stand-alone solar
PV systems projects54 would go a long way in facilitating a sustainable
implementation. In addition to targeting low voltage solar and wind power for
expansion in rural areas, the country’s existing small hydro potential represent viable
source of cheap power for communities near the river sites where suitable flow rate
and volume conditions for hydro power dam and power generation exist. Given that
hydropower generation in the country has existed in Ghana over the past 50 or so years
suggests that the country has the requisite expertise and manpower capacity to
successfully management such mini-hydro projects in a micro-grid setting.
54 The Climate Investment Funds (CIF) in 2015 endorsed Ghana’s plan to transform
and promote its renewable energy sector. The plan is to receive $40 million in funding
from the CIF’s Program for Scaling up Renewable Energy in Low Income Countries
(SREP). The plan is structured around four key projects: renewable energy mini-grids
and stand-alone solar PV systems; solar PV-based net metering with storage; utility-
scale solar PV/wind power generation; and a technical assistance project (supported by
the Sustainable Energy Fund for Africa – SEFA).
197
Chapter 6
CONCLUSION AND RECOMMENDED FURTHER RESEARCH
6.1 Conclusion
In the face of increasing anthropogenic emissions resulting in global warming
with the subsequent effects of climate change, it is important that Ghana pursues a
developmental path that decouples economic growth from reliance on fossil fuels in
the electric power sector of the country. Addition of substantial generation capacities
based on renewables (of wind and solar PV which have low-carbon and low-water
demand) instead of fossil fuels based generation technologies in Ghana would provide
significant improvements in livelihoods and human health.
Ghana has an excellent opportunity in its vast renewable energy resources. The
country can leapfrog polluting and water-intensive energy technologies to developing
decentralized renewable electricity system with a high proportion of prosumer base
towards sustainable socioeconomic development. More renewable energy deployment
would lead to more jobs, and reduce the footprint of power generation on water and air
pollution. These would enhance the E4 (Energy, Evnironment, Economy and Equity)
aspects of the country’s sustainability. In addition to promoting foreign investments in
huge centralized renewable energy systems, the government of Ghana should equally
foster the development of prosumer renewable systems in the country. This is because
renewable energy prosumer-ownership promotes capturing the full value of such
renewable energy systems for customers. Prosumer-ownership, therefore, can lead to
198
much more local economic multiplier effect compared to renewable centralized
systems that are owned and operated by non-local developers.
Although there are some policy efforts towards expanding renewable electric
power generation, the lack of adequate, coherent and consistent policies; technical
skills; institutional capacity; and infrastructure prevents the country from benefiting
from the enormous environmental, social and economic opportunities that the country
stands to benefit from. Further opportunities for value creation exist from
improvement in energy efficiency in the country. To fully take advangate of the
environmental and socio-economic benefits of renewable energy and energy efficiency
improvements, there is the need for the right mix of cross-sectoral (residential,
commercial and industrial and utility-level) policies. A policy decision to lower the
financial burden associated with acquiring rooftop solar systems for homes, offices,
and commercial/industrial customers and also to lower the cost of grid integration
would be necessary to encourage prosumer-ownership of renewable energy systems.
Building a domestic renewable energy industry would also require stimulating
investments. The need for strengthening firm-level capabilities, promoting education
and training, and encouraging research and innovation would be additional
requirements for building a solid local renewable energy industry in the country.
Slowly introducing local content requirements for renewable energy technologies in
the country after an adequate renewable energy technology market size is developed
would enhance the local economic value creation. An attractive financial incentive
scheme backed be an adequate, and functional renewable energy fund is crucial to
199
developing a widespread prosumer adoption of renewables in Ghana. A long term non-
partisan commitment from the government of the country, as well as support from the
international community, and private sector would also be inevitable.
6.2 Recommended Further Research
In advancing with policies towards a large proportion of deployed renewables
with a large base of prosumer-owned systems in Ghana, there are several areas where
further study need be focused. This section introduces two broad areas; namely
technical and financing challenges that should be investigated in future research. Each
of these two areas for further studies is introduced and accompanied by a brief
discussion.
Financing: Despite the potential for socioeconomic and environmental benefits
of decentralized renewables, its deployment in Africa and for that matter Ghana is not
adequately supported and therefore not widespread. One key factor to bring about a
shift towards decentralized distributed renewables is through enabling policy
instruments, and that is part of what this study addresses. Another mitigating factor is
the high initial cost for decentralized renewable energy as well as lack of available
financing or mechanisms.
Developing prosumer-centered renewables such as residential and commercial
rooftop solar PV in Ghana would require the design and implementation of a business
model that makes viable economic sense. Such a model would need to be designed
such that it provides an affordable financing scheme that has a lower financial risks.
200
Designing such a model around prosumer-suitable renewable energy technologies such
as rooftop solar PV will go a long way to increasing entrepreneurship in the energy
sector of Ghana and this would enhancing local economic value creation. This study
therefore strongly recommends further research on business models specific to solar
PV and wind in a prosumer or customer-centered generation setting.
Technical: Existing grid infrastructure in Ghana is technically inadequate, and
this would limit integrating large proportions of renewable energy, including
distributed PV in a high prosumer-setting. High concentrations of prosumer-generated
renewables can result in system distribution challenges including the following (IEA-
RETD, 2014):
Over-voltage conditions caused e.g. by sudden fluctuations in PV power
output;
Congestion issues caused by excess power export on certain nodes in the
system;
Back-feeding into the circuit and two-way power flows;
Stability issues related to inverter tripping because of grid voltage or frequency
fluctuations;
Transmission operator challenges in forecasting net loads and ensuring
appropriate available capacity;
A full discussion of these engineering issues is beyond the scope of this research. This
study therefore, recommends a comprehensive study of Ghana’s electric power
201
transmission and distribution systems to identify the what’s and how’s of fixing these
issues towards the absorption of renewables deployment with a focus on promoting
prosumerism.
202
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Appendix A: EMPLOYMENT FACTORS (FOR OECD COUNTRIES)
Construction
Times
(Years)
Construction/
Installation
(Job
years/MW)
Manufacturing
(Job
years/MW)
O&M
(jobs/MW)
Primary
Fuel or
Energy
Demand
(Jobs/PJ)
Hydro
(Large) 2 6 1.5 2.4
Natural
Gas 2 1.7 1.0 0.08 22
Coal 5 7.7 3.5 0.1 Regional
Wind
(Onshore) 2 2.5 6.1 0.2
Wind
(Offshore) 4 7.1 11 0.2
Solar PV 1 11 6.9 0.3
Biomass 2 14 2.9 1.5 32
Mini
Hydro 2 15 5.5 2.4
Ocean 2 9.0 1.0 0.32
Source: Rutovitz & Harris, 2012.
Appendix B: REGIONAL JOB MULTIPLIERS FOR AFRICA
(Rutovitz & Harris, 2012).
Year
2015
2020
2025
2035
Regional
Multiplier
4.3
4.2
4.3*
4.6
*Estimated through linear interpolation based on the given data was used to estimate
the multiplier for the year 2035.
223
Appendix C: EMPLOYMENT FACTOR DECLINE FACTOR RATE
(%) BY TECHNOLOGY.
Technology 2015-2020* 12015-2025** 2020-2030* 2025-2035**
Hydro (Large) -0.6 -0.6 -0.9 -1.2
Natural Gas 0.4 0.4 1.0 1.6
Coal 0.3 0.3 0.5 0.7
Wind (Onshore) 2.8 2.8 0.2 -2.4
Wind (Offshore) 7.2 7.2 4.5 1.8
Solar PV 6.4 6.4 4.9 3.4
Biomass 1.1 1.1 0.7 0.3
Ocean Waves 6.5 6.5 7.0 7.5
Mini Hydro -0.6 -0.6 -0.9 -1.2
*Data obtain from Rutovitz and Harris (2012)
**Data derived through linear interpolation and extrapolation.
Appendix D: SUMMARY OF APPROACHS TO ESTIMATING DIRECT
ENERGY EMPLOYMENT
Source:
Modified from Rutovitz & Harris, (2012).
224
Appendix E: WATER CONSUMPTION FACTORS FOR INPUT FUEL
PRODUCTION.
Input Fuel Quantity Water Factor
(m3/GJ) a
Coal 1 Short ton 0.164
Oil (Petroleum) 1 Barrel 1.058
Natural Gas 1 Mcf
0.109
a Water factor for each input fuel is the average of different methods of
production.
Source: World Energy Council, (2010).
Appendix F: WATER CONSUMPTION FACTORS FOR ELECTRICITY
GENERATION (m3/MWh)
Gleick
(1994)
Hightowera
(2010)
Macknic et al.a
(2011)
Value
s
Used
Power Plant Average Median Minimum Maximum
Coal 1.90 1 - 1.5 1.8 1.5 2.1 1.9
Oil 1.85 1.85
Natural Gas 1.85 0.4 -0.7 0.7 0.3 0.9 0.7
Nuclear 2.70 1.5 -2.7 2.0 1.6 2.5 2.0
Hydroelectric 17.00 17.0 5.4 68.1 5.4
Wood 2.30 2.3
Solar 0.10 0.1 0.0 0.1 0.0
Wind (On- and
Off-shore) 0.0 0.0 0.0 1.0 0.0
Bio-power
1.2 1.0 1.5 1.2
Biomass 1 – 1.5 1.2
Geothermal 5.1 1.0 0.6 1.6
CSP 2.8 – 3.4 1.6 1.3 1.8
Source: Wang et al., 2015.
225
Appendix G: ENERGY AND CARBON CONTENT OF FOSSIL FUELS.
Sources: (Biomass Energy Center, 2008)
Appendix H: ANALYSIS PROCEDURE FOR CO2
C + O2 = CO2 + Heat (Q)
In terms of mass (atomic mass unit); C = 12, O =16 and CO2 =44
Therefore, burning
12 kg of Carbon (C) in surplus of Oxygen (O) = 44 kg of CO2
Using coal an example,
Since O2/C = 32/12 = 2.7, and the carbon content in coal is 75%, then,
1 kg of Coal = (0.75*2.7) kg of Oxygen to burn = 2.025 kg O2
Therefore, the CO2 emitted is given by:
0.75 kg C + 2.025 kg O2 = 2.775 kg of CO2
Since O2/C = 32/12 = 2.7, and the carbon content in natural gas is 95%, then,
1 kg of Coal = 0.95 kg C, and this would emit 2.75 kg of CO2.
Fuel Energy Content
(kW-hr/kg)
Carbon by
Weight (%)
Average Thermal to
Electricity Efficiency (%)
Coal 8.5 75 35
Natural Gas 14.5 75 36
Oil 12.5 85 36