Energy Policy Strategist, Dr Yussif Sulemana, has urged the government to review the take or pay contracts in the energy sector. The take or pay provision obliges the buyer to either take goods from the seller or pay a penalty for not taking them.
Dr Sulemana argues that these contracts will cost the country significantly since it is highly likely that Ghana will default on taking the power produced by Independent Power Producers (IPPs). He questions the justification for entering into such agreements, particularly in the current situation where the country may not even need the excess power but will still have to pay for it.
Speaking on the Pulse on JoyNews, Dr Sulemana emphasized that the take-or-pay deals require a high level of efficiency to avoid penalties for unused energy. However, given the inherent inefficiencies in Ghana’s infrastructure, maintaining such efficiency is unlikely, leading to capacity charges.
Dr Sulemana suggests that the government should review the take or pay contracts to explore the possibility of renegotiating them to be more competitive. He acknowledges the potential challenges of renegotiation but believes that when done properly, it can give the country a competitive edge.
Furthermore, he advises the government to prioritize efficiency as a way to ensure that energy deals work to the country’s advantage. Failure to reach debt payment agreements with IPPs may result in a return of “dumsor,” the term used to describe the stage of load-shedding in Ghana.
Some stakeholders, including former Chief Executive Officer of the Volta River Authority, Kweku Awotwe, have also emphasized the importance of better negotiations in the energy sector to save money. The World Bank Country Director to Ghana, Pierre Frank Laporte, has identified Ghana’s energy sector debt as a major contributor to the country’s overall debt challenges.
