Our subsidy is just 25% of cost of rural electrification using grid extension – Black Star Energy CEO

It will cost the government of Ghana only a quarter of the total cost needed to extend electricity to rural communities by grid extension to subsidize the power produced by a local company in order to extend electricity to the other 15 per cent of rural communities without electricity in the country.

Ms Nicole Poindexter, the CEO of Black Star Energy, Ghana’s first commercially licensed off grid solar company, currently operating in the Ashanti Region, has said it will cost government only a quarter of the total cost needed to extend electricity to rural communities by grid extension to subsidize the power her company produces in order to extend electricity to the other 15 per cent of rural communities without electricity. She made the point at the Fourth Ghana Renewable Energy Fair, held in Accra from October 9 to 11, 2018.

In the quest to achieve universal access to electricity in Ghana to 90 per cent or more access rate, the government of Ghana has made renewable-based energy mini-grids an integral part of the Natioanal Electrification Scheme(NES); this is in recognition of the ability of renewable energy based mini-grids to serve remote communities that the national grid cannot reach economically.

Ms Poindexter made remarks in during a debate the Fair.

Ms Poindexter further stated that, “I think given the numbers that we have and these numbers we have provided to the Ministry as well as to the Energy Commission, if we were to charge exactly the uniform tariffs, we will need $200 capital subsidy in our numbers – assuming we can provide electricity to the communities that are similar to the ones we operate in now.

When we look at the total cost of grid extension and total cost of electrifying the 15 percent that are left and look at the cost of how much we will need to subsidize to provide electricity, at the uniform rate, our cost of the subsidy will be 25 percent of the cost of electrification using grid extension – and that is  just because grid extension is expensive”

She also said that, her company, Black Star Energy, signs a contract with the communities about the rate that the company charges.

“Interestingly, in the last three years, we have charged the exact same rate for all three years – we have not changed our rate structure,” she added.

In another comment on government’s role in the development of mini or micro-grids, Mr Newton said “Several recent analysis including the green micro grids markets assessments by the Africa Development Bank, has identified policy  regulation issues as the barriers to the development of mini-grids. The key challenge is how to achieve a viable investment blend with both private and public capital while adhering to national uniform power.

One approach to cover this policy gap is to transfer subsidies from other utility commercial customers or non-residential or from general tax revenues”

As a follow up to his comment, he then asked “ What credible strategies exist for cross subsidies to fund the viability gap that exists?”

Engineer A.T Barfour, Coordinator, Ghana Energy Development and Access Project at the Energy Ministry responded to the question by saying “ As to whether the PURC will factor this and treat it as an asset and they will let the private or public group bring the access to the mini grid into the tariff computation regime, it is the PURC which has to take that decision. Government of Ghana cannot force those types of subsidy gaps here and there”

He however, said government may volunteer to bear the cost of whatever deficit that will arise if government decides to give the greenlight to the PURC to charge the universal rate for the power produced by the private sector.

“Unless government itself comes to say, go ahead I will pay whatever is the shortfall to the private sector. But if you want to factor it into the tariff system, then it’s the PURC that can factor that one.

But I can’t suggest capital subsidy. I won’t because knowing our financial situation, I will not encourage capital subsidy from the government – the payment will be a problem” Ing Barfour added.

An advocate for the private sector led approach, Agyenim Boateng and Secretary to the Association of Ghana Solar Industries, concluded the debate by entreating government to draw lessons from how Nigeria is managing its mini-grid companies in order to put in place a robust regulatory structure for the mini-grid companies in the country.

By Bismark Elorm Addo

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