Ghana at Risk of “Dumsor” if Government Fails to Settle Debts with IPPs

Ghana’s energy system may face a return of power outages, locally known as “dumsor,” if the government does not settle its outstanding debts with Independent Power Producers (IPPs).

IPPS has issued a warning that they will cut off the supply of fuel and gas to the power plants responsible for Ghana’s energy supply.

Speaking with Opemsuo News, Mr. Sampson Addae, the Head of Research, Monitoring, and Planning for the Chamber of Petroleum Consumers (COPEC), revealed that the government owes IPPS a staggering sum of $1.7 billion.

To avert a potential crisis, the IPPS has demanded that the government pay off at least 30% of the total debt by July 1, 2023, or face a disruption in services.

Mr. Addae emphasized the need for the government to find a viable solution to the debt issue in order to prevent the recurrence of power outages.

He further highlighted that funds saved in the energy sector levy, known as the “Ursula bond,” which could have been used to settle the debts, had been utilized as collateral for a loan. The repayment of this loan extends over a 15-year period, contributing to the government’s failure to meet its obligations to the IPPS.

Ghana’s energy sector is burdened with significant debt, and the high cost of power generation hampers the country’s economic development. As of 2021, the electricity access rate in Ghana stood at 86.63%, with approximately 50% of rural residents and 91% of urban residents connected to the electricity grid.

Over the years, gradual reforms have been implemented to promote a vibrant energy sector and ensure a stable power supply. These reforms have opened up opportunities for independent power producers to participate in an industry that was previously dominated by public sector entities.

Ghana’s power supply is predominantly sourced from hydro generation and thermal generation, fueled by crude oil, natural gas, and diesel. Thermal generation accounts for 66% of Ghana’s power generation, while hydro generation represents 33%, according to the International Trade Administration. The total installed capacity of existing power plants in Ghana is 5,134 Megawatts (MW), with a dependable capacity of 4,710 MW.

Story by William Effah Mensah