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Gas-to-power market and investment incentive for enhancing generation capacity: An analysis of Ghana's electricity sector

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  • Fritsch, Jorik
  • Poudineh, Rahmatallah

Abstract

Ghana's electricity generation capacity is currently insufficient to meet demand, making power outages and load shedding common. The resulting impact is potentially devastating for the country's growth prospects. Traditionally, lack of an affordable and reliable fuel supply for power generation, coupled with ineffective institutions and an unfavourable investment climate, have resulted in Ghana's electricity sector performing poorly. In light of the 2007 discovery of natural gas reserves in Ghanaian waters, this paper examines whether domestic gas could advance the performance of the electricity sector, and if so, how. The results of our analysis show that utilization of gas reserves in Ghana's gas-to-power market is an economically superior strategy compared to an export-oriented utilization scheme. The lack of an effective regulatory framework for investment, skill shortages, and an inefficient electricity pricing structure continue to be the main constraining factors. Our analysis also considers possible approaches to modification of the electricity tariff in order to send the right signal to potential investors in generation capacity, without compromising the affordability of power supply.

Suggested Citation

  • Fritsch, Jorik & Poudineh, Rahmatallah, 2016. "Gas-to-power market and investment incentive for enhancing generation capacity: An analysis of Ghana's electricity sector," Energy Policy, Elsevier, vol. 92(C), pages 92-101.
    • Handle: RePEc:eee:enepol:v:92:y:2016:i:c:p:92-101
    DOI: 10.1016/j.enpol.2016.01.034
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    2. Bieber, Niclas & Ker, Jen Ho & Wang, Xiaonan & Triantafyllidis, Charalampos & van Dam, Koen H. & Koppelaar, Rembrandt H.E.M. & Shah, Nilay, 2018. "Sustainable planning of the energy-water-food nexus using decision making tools," Energy Policy, Elsevier, vol. 113(C), pages 584-607.
    3. Binta Yahaya & S A J Obansa & Malanta Sabiu Abdullahi, 2023. "Modeling the Demand-Supply Mismatch and Price Optimization of Natural Gas in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(8), pages 187-197, August.
    4. Pueyo, Ana, 2018. "What constrains renewable energy investment in Sub-Saharan Africa? A comparison of Kenya and Ghana," World Development, Elsevier, vol. 109(C), pages 85-100.
    5. Chen, Siyuan & Zhang, Qi & Wang, Ge & Zhu, Lijing & Li, Yan, 2018. "Investment strategy for underground gas storage facilities based on real option model considering gas market reform in China," Energy Economics, Elsevier, vol. 70(C), pages 132-142.

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    More about this item

    Keywords

    Gas to power; Electricity in Ghana; Generation adequacy; Investment; Tariff setting;
    All these keywords.

    JEL classification:

    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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