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Neill_58630 Oct 22

Industrial captive power generation – a green boost for Ghana’s industry or threat to the grid?

Industrial captive power generation – a green boost for Ghana’s industry or threat to the grid? image
Gain insight into EnergyNet's forthcoming new report Chain effect: Industrial energy policy in Africa in an era of captive power
Ghana has long recognized the importance of the nexus between industry and economic growth. Any yet growth remains sluggish while energy policy is not well-designed to support industry. What can be done to align industrial and energy policies?
 
In recent years, manufacturing and other large energy consumers have been turning to captive power – cheap, clean and reliable solar in particular – to serve their own needs. Does this mean a change of direction for both industry and utilities? What indeed might this mean for Ghana’s household access to electricity if utilities aren’t – at the same time - supplying industry at scale?
 
Growth within the manufacturing sector has been slow despite government policies introducing programs to transform the economy through industrialisation. These policies have focused primarily on creating an investment environment that strengthens institutional capacity and provides opportunities in the market for manufactured goods. Despite this, unreliable energy and high tariffs have affected performance. Energy prices and supply inevitably have an overall effect on how competitive the manufacturing industry is and how quickly it moves.
 
The One District One Factory (1D1F) program is one of the major policy frameworks in Ghanaian manufacturing. Part of 1D1F is to come away from being import-dependent, emphasising manufacturing and becoming an exporting nation. Decentralisation of industrial development is at the heart of the strategy providing a business environment that attracts investment. There are plans for at least 1 medium manufacturing plant in each of the 216 administrative districts.
 
Despite this, some companies which have been on boarded by the policy are operating at well below capacity due to insufficient supply of electricity. This was further highlighted with B5 Plus Limited, an offshoot of 1D1F, which has the potential capacity to be the largest steel manufacturer in West Africa. However, after a number of appeals to the Government of Ghana (GoG) for a reliable power source, they resorted to an $8m loan to the Ghana Grid Company (GRIDCo) and the Volta River Authority (VRA) for a dedicated power line to aid production. This provides an insight into how important it is to anticipate energy planning to achieve those development goals.
 
Many similar industrial ventures may be pondering whether they might choose to take the captive route. Others are already taking this option. The utilities and GoG need to anticipate and absorb, or resist, this market disruption to avoid serious challenges to their finances.
 
This is an overview of a small part of EnergyNet’s forthcoming report titled “Chain effect - Industrial energy policy in Africa in an era of captive power” which focuses on energy policies in Ghana and Kenya and how they align with industrial development goals. The full report will be ready to download next month.