Ghana’s energy sector is on the verge of financial collapse, driven by the government’s controversial preference for expensive liquid fuel procurement, a decision that is crippling the Electricity Company of Ghana (ECG) and threatening the country’s energy security.
At the heart of this crisis is the government’s profit-driven strategy of purchasing costly liquid fuels like light crude oil (LCO) and diesel, at the expense of cheaper and cleaner alternatives, such as natural gas, says a Power Systems Economist, Dr. Elikplim Kwabla Apetorgbor.
ECG, responsible for electricity distribution across the country, is facing growing financial pressures as it struggles to pay Independent Power Producers (IPPs) and fuel suppliers. These debts, Dr. Apetorgbor noted, are pushing the energy sector into a cycle of rising costs, accumulating debts, and growing instability, leading to power outages and reduced investor confidence.
According to Dr. Apetorgbor, while public discussions often focus on inefficiencies and revenue collection challenges, the core issue lies in the government’s deliberate procurement of high-priced liquid fuels over more affordable and environmentally sustainable natural gas.
“What appears to be an energy strategy has become a revenue-generating scheme for the government, or influential individuals, at the expense of a financially viable energy sector,” he stated.
Natural gas has long been recognized as the most cost-effective fuel for power generation in Ghana, offering a cleaner and more stable energy source. Despite this, the government has increasingly relied on liquid fuels, which carry significantly higher costs and environmental consequences.
This strategy, Dr. Apetorgbor in an article on the current energy sector, argued, is driven by opportunities for profit through price markups and commissions, made possible by the volatility of liquid fuel prices on international markets. In contrast, natural gas prices are typically locked in through long-term contracts, offering price stability and lower generation costs.
“The result is an unsustainable financial burden on ECG,” Dr. Apetorgbor explained. Power generation from liquid fuels is far more expensive than from natural gas, driving up tariffs that ECG cannot pass on to consumers due to politically sensitive electricity pricing. This mismatch leaves ECG operating at a deficit, unable to meet its financial obligations.
The financial strain on ECG is creating a domino effect throughout Ghana’s electricity supply chain. IPPs, which generate a substantial portion of the nation’s power, rely on timely payments from ECG to continue operations. Delays in payments lead to power shortages and disruptions as IPPs scale back or halt operations. Fuel suppliers, too, are left unpaid, further destabilizing the system.
Dr. Apetorgbor warns that unless the government shifts its fuel procurement strategy, the sector will continue to face frequent power outages, mounting debts, and decreased investor confidence. “The entire system is compromised, from generation to distribution, and the consequences are clear: financial instability, energy insecurity, and economic disruption,” he added.
In addition to the financial fallout, the government’s reliance on liquid fuels carries significant environmental costs. Light crude oil and diesel are among the most polluting fuels used for power generation, producing much higher levels of greenhouse gas emissions than natural gas. This reliance undermines global efforts to reduce carbon emissions and weakens Ghana’s own commitments to combating climate change.
Dr. Apetorgbor emphasized that the government’s strategy also jeopardizes opportunities for developing a sustainable energy sector. Renewable energy sources like solar and wind are becoming increasingly competitive, yet Ghana remains locked into an outdated, environmentally harmful energy policy. “This approach limits Ghana’s ability to attract investment in clean energy infrastructure, which is critical for stabilizing the sector in the long term,” he noted.
To address the energy sector’s financial and environmental challenges, Dr. Apetorgbor advocates for bold policy reforms. He calls for an urgent transition to natural gas as the primary fuel for power generation, the enforcement of cost-reflective tariffs, stricter regulation of fuel procurement processes, and increased investment in renewable energy.
“Natural gas presents an economically and environmentally viable alternative to liquid fuels,” he said. “By shifting priorities, Ghana can stabilize its energy sector and create a cleaner, more affordable, and sustainable energy future.”
