Climate change adaptation: Ghana energy mix initiatives

Yao Kwame, Tamale, Ghana
March 02, 2023

D uring the 2016 UN Climate Change Conference (COP21), 196 parties, including Ghana, endorsed this agreement in Paris (France). The Paris agreement cemented the key policies and measures necessary to achieve lobal emissions targets. The Nationally Determined Contributions or NDCs are the pillars of the Paris Agreement on climate change. The NDCs are a constellation of climate action plans, implemented at the national level, which cumulatively aim to cut emissions and adapt to climate impact. Each Party to the Paris Agreement must establish NDCs and update them every five years. In this framework, Ghana developed four decarbonization clusters, which seek to eliminate emission by 2060. They include: renewables, low-carbon hydrogen, battery electric vehicles and clean cook stoves. Together, the four clusters cover over 90 percent of 2060 abatement. The Paris Agreement is a binding international treaty on climate change.

Ghana has a population of 33 million growing at about 2.5 percent annually. Geographically, the country sandwidched between the arid Sahel region in the North and the Atlantic Ocean in the South. This position exposes the country to extreme weather events such as prolond severe drought, erratic and violent rainfall, which cause massive floods and coastal degradation. Drought and floods are also displacing the population from the North to the South. The economy is also suffering and loosing over US$200 million every year according to the World Bank. For these reasons, climate change adaptation has become a central plank of government public policies.

The Intergovernmental Panel on Climate Change (IPCC) defines adaptation as the process of adjusting to the current and future effects of climate change. This involves adjustments in ecological, social or economic systems in response to actual or expected climatic metamorphosis and their consequences. Adaptation may also include adjustments to moderate harm from, or to benefit from, current climate variability as well as anticipated climate change¹.

National adaption framework

Ghana’s climate adaptation policy is outlined in a series of policy documents and strategies. The government initially targeted four areas to address adaptation issues. They included sectorial strategies in energy and infrastructure, natural resources management, agriculture and food security and disaster preparedness and response.

Today Ghana constantly updates its approach to align their core objectives with global efforts. In recent years Ghana has shifted from simple compliance to international conventions and agreements to a more holistic approach to adaptation. The government has developed climate information services, an integrated landscape planning, and an early warning and disaster risk management system. In high risk areas such as the coastal region, the government is building sea defense walls to protect the coast and historical monuments. In parallel, an integrated water resource management and a crop insurance system target aim to develop resilience in communities, women and vulnerable groups.

Focus on the energy mix

The expression energy mix refers to the combination of resources used to produce and meet energy needs. In Ghana, hydro, oil, and gas dominate energy production. Fuel dominance is reversible with the right energy mix. The composition of the energy mix varies between and within countries and regions. Policy choices in energy diversification depend the structure of the economy and the availability of natural resources. Demographics, environmental, and geopolitical factors also influence Ghana’s policy choices.

Fossil fuel is not a renewable resources and data and empirical science confirms its contribution to climage change. However, the dominance is reversible with the right energy mix. Solar and wind are viable sources of energy for Ghana but they received the lowest share of investments from public authorities and private companies. At the moment installed capacity is dominated by thermal (68 precent), followed by hydro (30 percent), and renewables (0.82 percent).

The Tema LNG Terminal Company (TLTC)

• Ghana has resources to transform its energy mix. The country’s domestic resources comprise natural gas, untapped mini- hydropower potential, and non-hydro renewable energy (solar, wind and biomass). Ghana is a producer and also an importer of natural gas, which its uses to produce electricity. The country wants to capitalize on gas to change the energy mix. The government has set up the The Tema LNG Terminal Company (TLTC). It is a joint venture between the State of Ghana, represented by the National petroleum Corporation (GNPC), and the private equity firm Helios Investment Partners (and other private firms). Gas produced from TLTC will be used to generate enough electricity to power up to an estimated 30 percent of Ghana’s generation capacity.

Rooftop Solar

• Helios Solar Company, a subsidiary of LMI Holdings, a privately owned Ghanaian conglomerate has completed the first phase of a large rooftop solar project in the Tema Free Zone Enclave. The project will supply 16.82 megawatts of energy to Enclave Power Company, another subsidiary of LMI Holdings. The International Finance Corporation (IFC) is partly funding the project with a US$30 million loan facility. The solar plant is expected to reduce Ghana’s emissions by approximately 13,000 tons of CO2 equivalent annually.

• Helios has ambitious plans. The company says it aims to generate up to 1,000 MWp from renewable sources by 2030. In a public statement released to national news outlets, the comapny announced that it had secured a 2,300-acre land bank in Dawa to be developed into a solar park. Helios indicated that over the next six years, LMI Holdings intends to invest over US$1 billion into the local economy to expand our renewable energy program, develop and expand our industrial zones and business parks, and provide the infrastructure and services. The International Finance Corporation (IFC) has approved an additional US$110 million facility in December 2023 to develop an additional 150 MWp of solar energy in Dawa².

Wind Farm by the Volta River Authority - VRA

• The Volta River Authority is working with two wind developers, Vestas and El Sewedy, to develop 150MW of wind power in Ghana. This project has two phases. The first, based in Anloga, Anyanui and Srogbe communities in the Keta Municipality in the Volta Region, will generate 75 MW of electricity. The second project also with a 75 MW capacity will be located in situated at Wokumagbe and Goi in the Ada West District of the Greater Accra Region

• The Volta River Authority (VRA) is the main power generation company in Ghana, solely owned by the Government of Ghana (GoG) and established in 1961 by an Act of Parliament (Act 46). It forms the first arm of the recently restructured electricity generation, transmission and distribution chain in Ghana. VRA combines hydro, thermal and solar plants to generate electricity for supply to the local and export markets. Domestic corporate and institutional consumers are the Electricity Company of Ghana (61 percent of market consumption), mining companies and industrial establishments (who purchase electricity directly from VRA). VRA also exports to the Communauté Electrique du Benin (CEB), to Togo and SONABEL (Burkina Faso).

New energy transition and investment plan

On September 21, 2023, in New York, the President of Ghana launched a new energy transition and investment plan³. The plan outlined a pathway to Net-zero carbon emissions by 2060. This initiative will require the adoption of low-carbon technology in key economic sectors.

Ghana plans to target the extractives sector, manufacturing, and transport and utilities sectors to lower emission. The President said that the plan represents a US$550 billion opportunity for investors, which will generate 400,000 jobs within Ghana. The utilities and transport sectors will receive a large proportion of the investments. Diversifying energy sources is a pillar of this plan. Fossil fuels continue to dominate Ghana’s energy production and account for 68 percent of the energy mix. Flaring for example accounts for 97 percent of hydrocarbon emissions and 25 percent of total CO2 emissions. Ghana targets 80 percent reduction of flaring and venting by 2030 and to zero by 2060.

Financing the transition

Until the release of the new energy transition and investment plan, Ghana did not have a long term integrated roadmap. In 2019, the Ghana Energy Commission lamented that past transition initiatives tend stall after pilot projects. However, the 2023 plan provides more details on how Ghana intends to reduce emission. The plan has other development objectives, which include poverty reduction, a balance of gender participation and youth empowerment, especially on environmental issues. The government also promised to create conditions for investment into Ghana’s energy system. In the plan, the government carves a role for the capital markets. It invites the investor to mobilize funds for the projects.

A transition to renewable energy requires a modernization of infrastructure. For example, 30 percent of the electricity disappears during transmission. Distribution, inefficient electrical equipment, poor attitude towards energy conservation, and theft cause further losses. Wind and solar energies are intermittent and unreliable because they depend on the vagaries of nature. They need storage facilities and batteries. These low-emissions technologies speed up decarbonization.

Authorities want to mobilize funds through existing environmental taxes. Examples include airport tax (amended 2013, 2023), a petroleum tax (2014), special petroleum tax (January 2015), and the energy debt recovery levy (January 2017) and COVID-19 tax (2020). On average, these taxes grew from 0.5 percent of GDP in 2014 to 2 percent in 2021. A 2021 report by the World Bank⁴ suggests that replacing income with environmental taxes in Ghana has the potential to bring direct as and indirect co-benefits to energy production. However, internal financing will not be sufficient. For this reason, the government of Ghana invites the private sector to contribute and take advantage of the new energy transition and investment plan.

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