Over the last 5 years, how has the energy mix changed, and what have been the key drivers?

Ghana’s current energy mix comprises oil (34%), natural gas (25%), hydro (5%) and biomass (36%). Production of energy from solar and other renewables such as wind is negligible.

Pursuant to the efforts of successive governments to make the country’s energy mix cleaner and less expensive, the country saw a significant decrease in the reliance on oil between 2016 and 2020, although oil remains the highest single source of energy. Reliance on oil and biomass decreased from 49% to 34% and 39% to 36% respectively within the period, while reliance on natural gas for the same period increased from 7% to 25%. This increased reliance was further helped by the discovery and production of natural gas in Ghana’s oil producing fields. Reliance on hydroelectricity remained constant for the period at 5%. Although renewable energy, particularly solar, accounted for less than 1% of the energy mix from 2016 to 2020, energy supply from solar more than doubled, from 2 ktoe (kiloton of oil equivalent) to 4.89 ktoe within the period.

Spurred by the power crises in the last decade and half, Ghana quickly ramped up production capacity and currently has excess capacity. But the added capacity came at a relatively high cost. The government's response has been to renegotiate some identified power-purchase agreements (PPAs) and encourage renewable sources of energy, notably solar.

Currently, Ghana’s energy mix does not include nuclear power, although there are plans to include that by 2030.

What is the outlook for the energy and natural resources sector in the next 5 years? In particular:

Key policy decisions

The outlook for energy and natural resources is good, especially for the renewable energy and extractive sectors. In February 2019, the Ghana Renewable Energy Master Plan (REMP) was published. By 2030, the government, through the implementation of the REMP, aims to: increase the proportion of renewable energy in the national energy generation mix from 42 MW in 2015 to 1,363 MW (with grid connected systems totaling 1,094 MW); reduce the dependence on biomass; provide renewable energy-based decentralized electrification options in 1,000 off-grid communities; and promote local content and participation in the renewable energy industry. In line with achieving the goals of the REMP, an amendment to the Renewable Energy Act, 2011 (Act 832) was passed on 29 December 2020: the Renewable Energy (Amendment) Act, 2020 (Act 1045). Act 1045 provides for, among other things, net metering to encourage the generation of electricity from renewable sources by consumers; and mandatory investment in non-utility scale renewable energies by fossil fuel-based wholesale electricity suppliers, fossil fuel producers and other companies to offset their greenhouse emissions and mitigate the impact of climate change.

As mentioned above, there are plans to introduce nuclear power into Ghana’s energy mix. As part of Ghana’s nuclear power plan, construction of the country’s first nuclear power plant is expected to take place between 2025 and 2030. When completed, it is projected that the nuclear power plant will generate 1,000 MW of electricity.¹

With the aim of adding value to the country’s petroleum resources, the government has proposed the development of a petroleum hub. The petroleum hub would be located on a 20,000 acre parcel of land and is estimated to require USD60 billion to develop. It is expected to produce petrochemicals for local and foreign markets. This vision was given legislative backing with the passage of the Petroleum Hub Development Corporation Act, 2021, and the inauguration of its governing board.

As regards the extractive industry, the recent discovery of high-grade lithium in Ghana coupled with the increase in the exploration and mining of traditional minerals such as gold gives a very positive outlook to the sector.

Main policy challenges

The key challenges likely to be faced in the implementation of these policies, initiatives and the achievement of stated goals are likely to be: difficulty in accessing finance and long-term capital as well as high interest rates; instability of the Ghanaian currency (Cedi) and inflation; insufficient tax incentives; and insufficient technical knowhow for the operation and maintenance of renewable or nuclear energy technologies.

The anticipated role that renewables and/or new technologies will play

Currently, the government aims to increase the use and reliance on energy from renewable sources. Act 832 provides for a feed in incentive scheme with three components:

• Renewable purchase obligation: every electricity distribution utility or bulk consumer of electricity is required to purchase a percentage of its total electricity from renewable sources. Currently, the required percentage is set at 10%.
• Guaranteed feed-in tariff rates: The feed-in tariff fixed for electricity from renewable sources is guaranteed for a period of ten years and is renewable every two years thereafter.
• An operator of a transmission or distribution system is required to, at the request of the producer of electricity from renewable source, connect the producer to the transmission or distribution system within its coverage area.

With the above incentives coupled with the introduction of net metering, it is expected that there will be an increased use of renewable and other emerging technologies and that this will:

• increase energy security and reduce the cost of energy in Ghana which will, in turn, make the country more attractive to local and foreign investors;
• boost economic development and create jobs, particularly in manufacturing, assembling and installation of renewable technologies;
• reduce the adverse effects of energy production on the environment; and • increase access to electricity in rural parts of Ghana.

What are the key investment opportunities in the energy and natural resources sectors over the next 5 to 10 years?

In the renewable energy sector, it is anticipated that there will be investment opportunities in the areas of manufacturing/assembling of solar panels, battery and storage technologies, as well as electricity production for sale on the national grid or off-grid from solar farms. There are interesting prospects for corporate PPAs as well.

As regards nuclear power, they are opportunities in the areas of construction of nuclear power plants and supply of materials and logistics for the construction, operation, and maintenance of the plants.

In the natural resource sector, it is expected that Ghana will begin the commercial mining of lithium as a significant find has been made in the Central Region of the country. Considering the current global desire for clean energy and in particular battery storage facilities to power vehicles, this holds much promise for investors and the industry.

With particular focus on sustainability, and on reducing carbon emissions, how will the energy and natural resources landscape change over the next 5 to 10 years?

It is anticipated that, with the implementation of REMP, net metering for renewable energy consumers and the provision of tax incentives, access to and the use of renewable technologies by individuals and corporations will increase in the next five to ten years. However, this anticipated conversion would depend on the level of return on investment and competitive pricing of renewables as against non-renewables.

Given the significant levels of capital investment and technical knowhow required for constructing and operating a nuclear power station, it is unlikely that the country will have one running by the 2030 deadline.