ASEC kicks against proposed VRA-BPA merger, others

A leading energy think tank, the Africa Sustainable Energy Centre (ASEC) is pushing back against the recent proposal to merge the assets of the Volta

River Authority (VRA) and Bui Power Authority (BPA). In their view, this move is unnecessary as it could spell disaster for the nation’s energy sector should the government proceed.

In a press release, ASEC stated, "The merger of VRA and BPA and the separation of the VRA’s thermal power will usher in the collapse of Ghana's energy security. For years, VRA has managed a robust energy portfolio that includes solar, thermal, and hydropower, and dismantling this carefully balanced structure would jeopardise the country’s power stability.”

The think tank’s response comes a few days after aggrieved staff groups of the VRA expressed strong opposition to a proposed draft bill that seeks to merge VRA with BPA, combine the Northern Electricity Distribution Company (NEDCo) and establish an independent thermal Power Authority from VRA’s thermal plants.

ASEC cited the VRA’s significant contribution to the national grid and profitability over the years stating that a merger would reduce innovation and competition between the two energy producers.

“With a strong track record of profitability such as its impressive GHS 156 million profit in 2020, VRA has proven it is fully capable of managing its assets effectively. There is no need to fix what is not broken.

Hydropower, by nature, tends to operate as a natural monopoly due to its centralisation around key water resources. Consolidating the hydropower assets of VRA and BPA would stifle innovation and competition. With its floating solar and committed solar technologies, Bui contributes significantly to Ghana’s renewable energy targets. BPA and VRA have contributed significantly to achieving the 10% renewable integration by 2030.

ASEC foresees a future Renewable Energy Authority thus any signal or action to threaten the independence of VRA and or BPA will delay the national renewable energy drive, consequently affecting the country’s contribution to the SDGs,” ASEC argued.

READ PRESS RELEASE HERE

On the government’s plan to separate the thermal aspect of the Volta River Authority (VRA) into an independent thermal power authority for possible private sector ownership, ASEC is calling for an immediate halt to what could potentially harm one of the nation’s key power producers.

ASEC claims that privatising the VRA’s thermal asset will create room for Independent Power Producers (IPPs) to exploit the weakness of the system and subsequently expose electricity consumers to massive price hikes.

“VRA has played the role of a "social powerhouse", acting as a shield for Ghanaians against sharp electricity price hikes, especially from the possible market power of Independent Power

Producers (IPPs). Privatising the only thermal asset of the state would open the door for these IPPs to exploit weaknesses in the system, leading to massive price hikes for consumers,” they

said.

According to them, this stance is rooted in the fact that the VRA has a track record of profitability hence any move to hand their assets to an Independent Thermal Power Authority is unjustifiable.

“Privatisation is traditionally justified when a public entity consistently underperforms and drains government resources, but that is not the case with VRA. If thermal assets were removed from VRA’s portfolio, the organisation’s ability to guarantee a reliable energy supply would be severely compromised.

Thermal generation plays a crucial role in stabilising VRA’s revenue streams, especially since its hydro assets, which supply power to large industrial consumers like VALCO, are priced below market value. The thermal assets, being unregulated, allow VRA to balance its books. Without this flexibility, VRA would face liquidity challenges, especially considering the ongoing payment issues with entities like the Electricity Company of Ghana (ECG).”

Referencing some real-world cases, they warned that a misstep can lead to a catastrophe. They stated how “looking at examples worldwide, it is clear that privatisation of generation assets, if poorly designed, can lead to catastrophe. In California, the electricity market collapsed between 2000 and 2001 due to a flawed market design, and Ghana is on the verge of adopting the very trajectory. Brazil faced a similar crisis in the early 2000s”.

Lastly, merging ECG and NEDCo is a step that must be reconsidered immediately. They believe

merging two entities which are making significant losses as one is uncalled for. This move will

divert attention from addressing the core issues and make it difficult for the new distribution

company to turn a profit. ASEC reiterates that the way to go for the distribution sector is to privatise

part of the operations of the ECG to address the current electricity sector menace. This will create checks

and balances, ensuring fiscal discipline, and bringing in revenue to curb the current electricity crisis.

ABOUT ASEC

Africa Sustainable Energy Centre (ASEC) is a leading independent think tank pioneering sustainable energy practices and climate resilience solutions across Africa.

This organisation looks to contribute to the unbiased discourse on energy in Africa and critique government policies that may hamper progress in this direction. It comprises a collective of brilliant experts across various fields including energy, engineering, research and media.

ASEC seeks to provide solutions and a blueprint for sustainable energy currently and for the future, for Africa and the rest of the world.