Regulation of electricity utilities – power generation

Authorisation to construct and operate generation facilities

What authorisations are required to construct and operate generation facilities?

By virtue of the Energy Commission Act, participation in any segment of the power sector, either for generation, transmission, wholesale supply, distribution or sale of electricity, requires a licence.

The Energy Commission is required to make a decision regarding any application within a maximum period of 16 days. Applications will be granted as a matter of course unless there is compelling reason not to do so. Such reasons must be founded on technical data, national security concerns, public safety or any other reasonable justification.

Generators wishing to be connected to the transmission system must enter into an electrical connection agreement or transmission services agreement with GridCo.

Under the Renewable Energy Act, every person who intends to engage in a commercial activity in the renewable energy sector requires a licence. The commercial activities in the renewable energy industry are production, transportation, storage, distribution, sale and marketing, importation, exportation and re-exportation and installation and maintenance.

The licensing requirements are subject to compliance with the Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations, 2017 (L.I. 2354) which apply to all persons engaged in the energy supply industry.

Grid connection policies

What are the policies with respect to connection of generation to the transmission grid?

The policy for the transmission market is to provide an adequate, safe and reliable electricity transmission network. To achieve this, the Board of the Energy Commission in 2008, put in place the Electricity Transmission (Technical, Operational and Standards of Performance) Rules, 2008 (the Transmission Rules). The purpose is to establish the requirements, procedures, practices and standards that govern the operation and use of the NITS.

Under the Transmission Rules, GridCo is required to operate the NITS to offer fair, transparent, open access and non-discriminatory services to grid participants.

In order to connect to the NITS, the operator of a generation facility is required, among others, to design, install and maintain its plant and equipment to meet the requirements of the connection requirements of GridCo. Further, the operator must operate its plant and equipment in accordance with dispatch instructions of GridCo and to meet system performance and reliability requirements in a manner that is consistent with the reliable operation of the transmission system.

Alternative energy sources

Does government policy or legislation encourage power generation based on alternative energy sources such as renewable energies or combined heat and power?

Available renewable energy sources

In Ghana, the government has policy and legislation frameworks to encourage power generation based on alternative energy sources. It is government policy to increase access to modern forms of energy. The Implementation of the Renewable Energy Master Plan reinforces governments desire to increase the utilisation of renewable energy sources.

According to the Renewable Energy Act, renewable energy includes energy obtained from non-depleting sources including wind, solar, hydro, biomass, biofuel, landfill gas, sewage gas, geothermal energy and ocean energy. Ghana is well endowed with renewable energy resources, particularly biomass, solar, wind energy resources, and to a limited extent mini-hydro.

The goal of the renewable energy sub-sector is to increase the proportion of renewable energy, particularly solar, wind, mini hydro and waste-to-energy in the national energy supply mix and to contribute to the mitigation of climate change.

The development and use of renewable energy and waste-to-energy resources have the potential to ensure Ghana’s energy security and mitigate the negative climate change impacts of energy production and use as well as solve sanitation problems.

Biomass is Ghana’s dominant energy resource in terms of endowment and consumption. Biomass resources cover about 20.8 million hectares of the 23.8 million hectare land mass of Ghana, and is the source of supply of about 60 per cent of the total energy used in the country. The vast arable and degraded land mass of Ghana has the potential for the cultivation of crops and plants that can be converted into a wide range of solid and liquid biofuels.

The production, transportation, sale and pricing of wood fuels are all undertaken by the private sector except for taxes and levies, which are regulated by local government authorities. The wood fuels business will continue to be operated and managed by the private sector.

The development of alternative transportation fuels such as gasohol and other biofuels can provide substitute fuels for the transportation sector and help diversify and secure future energy supplies of Ghana.

The major challenge in biomass energy supply is how to reverse the decline in the wood-fuel resource base of the country and further sustain its production and use by improving the efficiency of production and use.

The biomass policy focuses on improved production and efficient use of biomass in the short term while increasing regeneration and fuel substitution in the medium to longer term, as well as shifting from the use of biomass to alternative sources of energy.

By virtue of its geographic location, Ghana is well endowed with solar resources that could be exploited for electricity generation and low heat requirements in homes and industries. Solar energy utilisation has, however, been limited owing to its comparatively higher cost.

The government is committed to improving the cost-effectiveness of solar and wind technologies by addressing the technological difficulties, institutional barriers, as well as market constraints that hamper the deployment of solar and wind technologies.

A major challenge in the development of solar and wind is the high cost of these energy sources owing to the current state of their technology.

Waste-to-energy projects have become a very important mechanism for the management of the growing sanitation problem facing urban communities as well as a means of contributing to energy supply and security. Significant amounts of wastes are generated in Ghana. These include municipal waste (both solid and liquid), industrial waste and agricultural waste.

There are many energy technologies which can convert these waste materials into electricity, heat and fuel. The conversion technologies include combustion, gasification, pyrolysis, anaerobic digestion, fermentation and esterification.

Some waste-to-energy technologies that have been developed in Ghana are anaerobic fermentation of municipal waste and industrial liquid wastes to produce biogas for heating and electricity generation, combustion of solid wastes to produce electricity in combined heat and power (CHP) systems.

Government policies and legislative framework

The Renewable Energy Act is the most recent energy related legislation geared towards the encouragement of Ghana’s drive to boost the renewable energy sector in Ghana.

The key policy focus is to engage Ghanaian engineers and scientists to cooperate with other experts to bring down the cost of renewable energy technologies in order to make them competitive as well as creation of fiscal and pricing incentives to enhance the development and use of renewable energy. Renewable energy technologies that are competitive will be promoted.

The government intends to diversify the national energy mix by implementing programmes to support development and use of renewable energy sources. Under the Renewable Energy Act, there are financial incentives (including a lucrative feed-in tariff) for renewable energy projects.

More specifically, the PURC has the power to mandate feed-in tariffs for renewables which includes a requirement that, for each energy purchase, an offtaker will have to obtain a certain per centage from renewable sources to benefit. The commission is tasked with recommending exemptions from taxes, duties and levies with respect to machinery, equipment and other input into renewable projects.

The feed-in tariff set by the PURC remains in force for a 10-year period and subsequently subject to review, every two years thereafter.

Free zone developers and enterprises granted licences under the Free Zones Act are exempted from the payment of income tax on profits for the first 10 years. The income tax rate after 10 years does not exceed a maximum of 8 per cent of the profit.

The benefits enjoyed by operators in the free zones include guarantee against expropriation, unconditional transfers of profits, dividends, charges and fees, remittances and other payments through an authorised dealer bank in free convertible currency.

Climate change

What impact will government policy on climate change have on the types of resources that are used to meet electricity demand and on the cost and amount of power that is consumed?

Environmental concerns are a prominent part of every industry today and the electric power industry is no exception. Climate change emerged on the political agenda in the mid-1980s with the increasing scientific evidence of human interference in the global climate system and with the growing public concern about the environment.

Electricity supply is currently vulnerable to climate change. About 67 per cent of electricity generation in the country is from hydropower and 33 per cent is from thermal generation using diesel (Energy Statistics 2006), with a small contribution (less than 1 per cent) from small-scale solar systems. By 2020 the energy supply is expected to be more diversified, according to the National Energy Plan for 2006-2020 and the Renewable Energy Master Plan, with a larger contribution from natural gas and renewables and, potentially, from nuclear power.

The production and use of energy impact on the environment and global climate in varying degrees. The exploitation of biomass for energy purposes results in deforestation, while the use of fossil-based fuels contributes to climate change.

Ghana’s participation in the Stockholm Conference in 1972 signified the beginning of the country’s desire and willingness to make concerted and conscious efforts at the management of its environment.

At the Earth Summit in Rio de Janeiro 20 years later, Ghana and the world moved closer to the objective of living in harmony with our environment by signing the Rio Conventions.

Before a person undertakes any activity or operation in relation to electricity, that person must obtain the necessary environmental approvals and permits valid for a period of 18 months. The EPA will not grant an environmental permit unless the applicant submits an environmental impact assessment (EIA).

In addition to the granting of a licence by the Energy Commission, before any project can take place, the EPA must give a permit for the project after a detailed environmental impact assessment has been carried out as regards the potential effects of the project on the environment.

Ghana generates most of its power from hydroelectric facilities, which do not cause emissions of harmful elements into the atmosphere. But their large reservoirs have some impact on the environment by flooding large areas, dislocating people, changing the ecology and causing silt formation.

Transmission lines may require intrusion on natural areas. They may be visible from scenic areas or intrude on residential neighbourhoods. They may destroy or disrupt wildlife habitats. Therefore prospective operators in the electricity market seeking to obtain licence must provide environmental disclosure to the Energy Commission. Prior to construction, the applicant must acquire siting clearance (siting permit).

The applicant for licence must provide an EIA report certified by the EPA and an environmental permit or permanent environmental certificate issued by the EPA.

The government’s policy on climate change is that there will be a shift towards generation from renewable energy sources. Thermal generation using crude oil will shift towards the use of natural gas. Consumption of power will decline owing to energy conservation methods and cost of electricity might increase owing to the high cost of generation from using renewable energy technologies.

The medium-term policy objectives for the achievement of the energy sector goals include steps to minimise environmental impacts of energy supply and consumption through increased renewable energy and efficient energy delivery.

The government’s strategic goal is to ensure that energy is produced, supplied and used in an environmentally sustainable manner. The strategies will focus on the conduct of strategic environmental assessment and EIA studies and social impact assessment studies of all energy projects, with associated adaptation and mitigation plans for environment and climate change.

The government’s policy on climate change in relation to the energy sector includes the following resolutions:

  • to adopt an inter-sectorial approach to energy planning and development that integrates energy development with energy conservation, environmental protection and sustainable utilisation of renewable energy resources;
  • to reduce the pressure on forests for wood-fuels and encourage the use of renewable energy resources in order to reduce the use of fossil energy;
  • to ensure that rigorous feasibility studies are undertaken for hydro-electricity facilities and other significant generating facilities all of which must be subjected to environmental impact assessment; and
  • to maximise the use of the nation’s hydrocarbon resources in the production and distribution of energy.

Does the regulatory framework support electricity storage including research and development of storage solutions?

Ghana’s Renewable Energy Act provides a regulatory framework which supports electricity storage, research and development. The regulatory framework mandates anyone who seeks to engage in any storage or other commercial activity in the renewable energy industry to obtain a licence to be granted by the Energy Commission. The licence may require the installation of a suitable facility for the storage of the renewable energy, which suitability shall be determined by the Energy Commission.

The establishment of the Renewable Energy Fund and Energy Fund is to promote research and development of storage solutions. The objects of these funds is basically to provide financial resources for the promotion, development, sustainable management and utilisation of electricity and renewable energy sources.

The funds are primarily applied to the provision of financial incentives, feed-in tariffs, capital subsidies, equity participation, etc, for projects related to the development and utilisation of energy resources including storage solutions.

Government policy

Does government policy encourage or discourage development of new nuclear power plants? How?

Policy framework

In 1964, Ghana decided to undertake the Ghana Nuclear Reactor Project. The project was intended to introduce nuclear science and technology into the country and to exploit the peaceful applications of nuclear energy for national development.

At present, the government’s policy is to diversify the energy mix by exploring options to develop nuclear energy. The goal is to develop nuclear power as an option for electricity generation in the long term.

Ghana has participated and is still participating in coordinated research projects with the International Atomic Energy Agency (IAEA) which helps to increase the nuclear knowledge base of the country. Ghana Atomic Energy Commission (GAEC) is in close contact with other International Nuclear Agencies such as Global Nuclear Energy Partnership.

Nuclear Power Planning Committee (NPPC) involving stakeholder institutions was established in 2008 for the formulation of the nuclear power policy and development of the basic elements of nuclear infrastructure. Based on the NPPC’s recommendations, the government took a cabinet decision in 2008 to introduce nuclear energy into Ghana’s energy mix.

In line with this objective, the Ghana Nuclear Regulatory Authority was established with a mandate to develop regulations for the licensing of, and guidance during the construction and operation of, a nuclear facility.

Human resource capacity building currently in place is in two forms (ie, degree and non-degree awarding programmes).

In the degree awarding category, the GAEC has established a Graduate School of Nuclear and Allied Sciences in collaboration with the University of Ghana with assistance from the IAEA to award masters and PhD degrees in nuclear science.

The non-degree training programmes involve the use of the 30kW research reactor in teaching and training of scientists and technicians in the field of reactor operation, physics, safety, engineering, maintenance etc.

IAEA has also formulated technical cooperation projects such as GHA0008; planning for sustainable energy development, GHA0009; human resource development and nuclear technology support, GHA0011, etc to up the country’s nuclear knowledge base.

Ghana participates in IAEA training courses and workshops on national, regional and international levels.

Legal and regulatory framework

The Atomic Energy Commission Act 2000 (Act 588) provides the legislative framework for nuclear power in Ghana. The Act deals with national energy policy including economic and commercial considerations, with a clear designation of responsible institutions or bodies, including their relationships with nuclear power.

The Atomic Energy Commission is the independent regulatory authority responsible for the safety, security and safeguards of nuclear power. This includes a system of licensing, inspection and enforcement covering all subject areas of nuclear law.

At the international level, there are some basic international legal instruments that Ghana has to ratify and implement to show commitment to peaceful use and application of nuclear technology.

Regulation of electricity utilities – transmission

Authorisations to construct and operate transmission networks

What authorisations are required to construct and operate transmission networks?

Construction and operation of transmission networks require the acquisition of an electricity transmission licence.

According to the Transmission Rules, the transmission system comprises electricity plant and equipment within the borders of Ghana that function or are operated at any voltage higher than 36kV as well as any associated feeder or supply equipment that are for shared or for common use.

The ETU is the exclusive and independent operator of all transmission assets irrespective of ownership and plays the central role in respect of activities related to the NITS. The ETU transports electricity from the producers to bulk consumers. GridCo is the sole owner and operator of the NITS.

All prospective participants in the deregulated segment of Ghana’s electricity supply industry must obtain a transmission licence from the Energy Commission. They must also negotiate and conclude interconnection service agreement with the ETU.

The ETU and all grid participants must comply with all relevant laws, the requirements of the Grid Code, permits, prudent utility practice and applicable international standards. Generators wishing to be connected to the transmission system must enter into an electrical connection agreement or transmission services agreement with GridCo.

To ensure transparency and non-discriminatory access to the relevant information, the ETU must make available to the public at its offices the procedures for obtaining and terminating transmission interconnection services agreements with any licensee.

A transmission licence authorises the licensee to monitor and control the operation of the national interconnected network to provide open access transmission and interconnection services, and provide open access transmission and interconnection services to operators domestically and internationally.

There are three stages in acquiring an electricity transmission licence. At stage one, the prospective operator must acquire a provisional licence.

At stage two, the prospective licensee must obtain a siting clearance (siting permit) and construction permit (authorisation to construct). A construction permit authorises the operator to physically construct its machinery and plants on the approved site. Stage three involves the acquisition of an operational licence (authorisation to operate). This authorises the operator to operate.

Eligibility to obtain transmission services

Who is eligible to obtain transmission services and what requirements must be met to obtain access?

Every bulk power customer (distribution utilities, companies, etc) is eligible to obtain transmission services at a fee if it satisfies all established technical and operational requirements.

A grid participant must be a legal entity having a valid connection agreement with the ETU for the purposes of:

  • constructing, owning and providing NITS infrastructure or ancillary services;
  • injecting, wheeling, or offtaking power for its own use or for retail; or
  • exchanging power either with the electricity networks of neighbouring countries or within the WAPP.

By virtue of section 11 of the Energy Commission Act, participation in any segment of the power sector, either for transmission, wholesale supply, distribution or sale of electricity, requires a transmission licence.

A transmission licence is subject to the conditions determined by the Energy Commission. The commission is required to make a decision of any application within a maximum period of 16 days. Applications will be granted as a matter of course unless there is compelling reason not to do so. Such reasons must be founded on technical data, national security concerns, public safety or any other reasonable justification.

A distribution company or bulk customer who wishes to receive power from the NITS must design, construct and operate its network connected to the NITS in accordance with prescribed standards and in accordance with the instructions of the ETU.

GridCo is responsible for the good governance and management of the NITS in accordance with the Grid Code and guided at all times by generally accepted best practices for an independent system operator.

All wholesale suppliers, distribution companies and permitted bulk customers have the opportunity to connect to the NITS and have fair and equitable access to the services provided by the ETU.

No facilities can be connected without a minimum arrangement for communications, metering and protective relaying being in place.

Any operator that wants to obtain transmission services must negotiate and execute a Connection Agreement with the ETU before the completion of the installation, erection or construction of the connection to the NITS. The Connection Agreement sets out the terms and conditions for connection to the NITS and provision of service.

The ETU is empowered to spell out its own transmission conditions and charges in the transmission agreement subject to approval by the PURC.

The Energy Commission in consultation with the PURC prescribes standards of performance for the supply, distribution and sale of electricity to consumers by licensed public utilities. The standards of performance include matters relating to voltage stability, maximum number of scheduled and unscheduled outages, number and duration of load shedding periods and metering.

Every grid participant that intends to establish and connect to the NITS any new or modified equipment or network that it owns, operates or controls must liaise with the ETU and the NITS asset owner, and obtain the required approval from the Energy Commission.

To avoid discrimination in the transmission of electricity, the ETU must develop and publish in detail all the requirements, qualifications and administrative procedures to be fulfilled or followed by those seeking to be provided services by the ETU.

A grid participant must construct, operate and maintain all equipment that are part of its facility in accordance with the requirements of the Grid Code, prudent utility practice and applicable national and international laws, protocols and standards.

Government transmission policy

Are there any government measures to encourage or otherwise require the expansion of the transmission grid?

Ghana’s transmission policy objective is to provide an adequate, safe and reliable electricity transmission network. To achieve this, the National Energy Policy requires the government to support private sector co-financing with government for grid extension to designated franchised zones, increase funding from government and other multilateral and bilateral sources for the National Electrification Scheme and to support new service connections for electricity in the rural areas. There are many government incentives to encourage expansion of the transmission grid. For instance, there are tax exemptions and reliefs, easy clearing at the ports and the like, meant to encourage expansion of the transmission grid.

Ghana’s exchange controls were relaxed substantially in 2006, so that now, the only necessary prerequisite for the repatriation of funds is to repatriate funds through an authorised dealer bank. These banks report foreign exchange transactions to the Bank of Ghana, but no exchange controls are imposed.

In 2013, Ghana passed the Ghana Investment Promotion Centre Act 2013 (Act 865) (the GIPC Act). Among others, the GIPC Act is to encourage and promote investments in Ghana and to provide an attractive framework and a transparent, predictable and facilitating environment for investments into various sectors (including the energy sector) in Ghana. Foreign investors are now required to register with the Ghana Investment Promotion Centre (the GIPC) before commencing business operations in Ghana. Upon registration, a foreign investor is entitled to receive investment support from the GIPC and benefit from the investment incentives under the GIPC Act.

The GIPC Act provides an express guarantee for the repatriation of dividends, foreign debt service costs and distributions of equity following the winding-up of the business. Repatriations from Ghana can be made in freely convertible currency without any restriction insofar as the repatriation is done through a licensed bank.

Further, the GIPC Act, provides guarantee against expropriation or nationalisation by the government. A foreign investor cannot be compelled by law to cede his or her investment to another person. Every nationalisation or expropriation must be done under a law that provides for payment of fair and adequate compensation and a right to access the High Court of Ghana for determination of investor’s interest or right and the amount of compensation to which the investor is entitled.

The government has also shown commitment to provide support for the expansion of its transmission facilities by providing guarantees and comfort letters, subject to parliamentary approval, to foreign investors who enter into power purchase agreements and other forms of support agreements with public utilities in Ghana. The government is also minded to provide special tax reliefs, subject to parliamentary approval, to foreign investors who invest resources in expanding the transmission grid.

Rates and terms for transmission services

Who determines the rates and terms for the provision of transmission services and what legal standard does that entity apply?

Rates and other economic terms and conditions for transmission services are determined by the PURC. The technical terms for the provision of transmission services are determined by the Energy Commission. The Grid Code that contains technical standards and requirements for transmission services.

The only licensed utility that provides transmission services is GridCo. All grid participants are required to enter inter into transmission agreement with GridCo before they can operate. All rates set by GridCo are subject to approval by the PURC.

The PURC provides the guidelines for fixing rate to be charged by public utilities for their services. In doing this, the PURC takes into account such factors as the interests of the consumer, the interests of an investor, the cost of production of the service, and the assurance of the financial integrity of the public utility.

A public utility cannot directly or indirectly demand or receive a higher rate than the rate approved by the PURC. A public utility may, with the written permission of the commission, demand and receive from a consumer a special rate agreed to by the public utility and the consumer.

The PURC may also fix a uniform rate throughout the country, a region or district for a service provided by a public utility. In doing this, the commission may take into account the population distribution in the country, the need to make the best use of a natural resource of the country, and the economic development of the whole country.

All revision of rates or new rates chargeable in respect of new services must be filed with the PURC at least 60 days before they become effective.

Before approving a rate, the PURC is required to give the public utility and consumers affected by the rate a reasonable opportunity of being heard. Rates approved by the PURC must be gazetted. In 2019, the PURC reviewed and approved utility tariff increases for various categories effective 1 July 2019.

Entities responsible for grid reliability

Which entities are responsible for the reliability of the transmission grid and what are their powers and responsibilities?

The regulators (the PURC and the Energy Commission) are responsible for the reliability of the transmission grid. The PURC ensures reliability by approving tariffs. The Energy Commission, on the other hand, ensures that licensing requirements, procedures, practices and standards are enforced in the NITS.

The Energy Commission monitors the operations of the transmission utility to ensure that transmission services are reliable. The PURC also monitors performance, quality of service, efficiency and to ensure compliance with technical standards.

To maintain stable and secure operation of the NITS to provide the expected standard of service for the benefit of all grid participants, certain minimum technical, design and operational criteria are to be met by all grid participants seeking connection to the NITS.

GridCo is responsible for wholesale power supply reliability from generation and transmission to delivery at the bulk power distribution centres.

To assure reliability of the transmission grid, transmission licences are granted subject to conditions. The Energy Commission monitors and enforces compliance with all licence conditions. A contravention of the licence conditions gives rise to penalties.

As part of the compliance monitoring procedure, the licensee is required to submit to the Energy Commission a detailed corporate performance statistics half-yearly and an annual report at the end of each financial year. The performance statistics include the benchmarks stipulated in all the relevant legislation and Codes as well as the benchmarks stipulated in the respective licences.

Authorised officers of the Energy Commission have the right of free access to the premises or operational area of the licensee for the purpose of inspecting and ensuring compliance with the licence conditions.

Prior to suspension or cancellation of a licence, the defaulting licensee must be given an opportunity to respond to the commission’s written complaint and the proposed action of remedy.

The commission may cancel a licence that has been granted but has not been utilised within one year from the date of issue after giving 30 days’ notice to that effect. The ETU monitors and reports to the Energy Commission the performance of the NITS in terms of quality and reliability (ie, adequacy and security) of supply.