By Barnaby Dye
On the 27 August 2012, a small group of pirates triggered the first of two major power crises in Ghana. Attempting to escape from the Togolese Navy on a captured oil tanker, the pirates left the ship’s anchor trailing. It snagged on the West African Gas Pipeline, which transports Nigerian gas to Togo, Benin and Ghana. This sparked a major fuel shortage for some of Ghana’s power plants, which combined with drought and fiscal issues to plunge the country into four years of electricity shortages and widespread load shedding (the deliberate shutdown of electric power in parts of a power-distribution system). However, this crisis of shortage was quickly replaced with one of overabundance: Ghana went into a power plant construction overdrive, resulting in electricity-generation capacity equalling twice the country’s demand by 2018. This increase is particularly problematic as it came from ‘take-or-pay’ contracts that involve the government’s distribution utility, the Electricity Company of Ghana (ECG), promising to pay private electricity companies typically for 90% of the power they make available, regardless of whether it is used. Ghana’s large imbalance in supply and demand is leaving a costly bill, reaching 4%–5% of GDP in 2018 (World Bank, 2018).
Ghana has therefore lurched from blackouts caused by insufficient electricity generation, to a financial crisis caused by too much power. How have these contrasting disasters occurred? What has been done to fix them? My latest paper for FutureDAMS analyses both issues, demonstrating the underlying political factors causing the crisis of absent and overabundant power and the way politics has overwhelmed attempts to fix the sector.
This paper demonstrates the importance of Ghana’s intense political competition. It meant that governments diverted funds from the electricity sector towards election-winning initiatives. Both parties have also stopped an independent regulator from setting higher electricity tariffs. The post-2012 election deficit meant that when the gas pipeline broke, the energy utility companies did not have the money to pay for fuel, causing power cuts for 4 years.
Then, with the 2016 election on the horizon and power shortages continuing, the government panicked, buying an enormous number of power plants through the private sector. To do this, they overrode the role the experts are supposed to play in planning electricity generation. Handing out these private sector deals also likely helped fill the incumbent political party’s election coffers. Alongside a focus on the election, the boom in power plants was the result of high-modernist ideology. These involved believing that megawatts of electricity would linearly translate into industrialisation and economic growth, despite all the barriers faced by the Ghanaian economy. Despite most expertise stating that such linear growth would not happen, high modernist beliefs created an additional rationale to build double the number of power plants than Ghana needed. The result is that Ghana has to pay for power it can’t sell, plunging the energy utilities into debt.
Such political economy explanations contrast with the typical prognosis for Ghana’s energy sector woes. These tend to follow the 1990s ‘Standard Reform Model’, created by the World Bank. Its approach is based on the premise that formal separation of institutions and the creation of market mechanisms creates efficiency and effectiveness. In contrast, this paper demonstrates that formal separations and market logics were overwhelmed and subverted by Ghana’s political economy. It therefore concludes by arguing that the study of the electricity sector needs an alternative understanding of politics to that informing the standard reform model. A focus on the nature of political power, on the pressures facing political elites and their ideology, offer a better foundation.
Note: This article gives the views of the author/academic featured and does not represent the views of FutureDAMS as a whole.