Institute of Climate and Environmental Governance flags technical gaps in Ghana’s 2026 energy plans
By Maame Efua Kwaduah
The Institute of Climate and Environmental Governance (ICEG) has raised concerns over what it calls “shortfalls” in the energy sector proposals outlined in Ghana’s 2026 Budget Statement and Economic Policy.
While recognising the government’s commitment to energy security, ICEG says some measures may offer only temporary relief rather than tackling deeper structural issues.
Policy Lead for Climate Finance and Energy Transition at ICEG, Kwesi Yamoah Abaidoo noted that while these actions keep the lights on, they fail to address key technical challenges such as weak grid infrastructure, inefficient plants, high system losses and outdated metering.
ICEG’s assessment highlighted several points of concern. The institute argued that short-term financial solutions, such as clearing arrears, restoring letters of credit, and settling outstanding invoices, may stabilise cash flow temporarily but do not address ongoing operational and technical inefficiencies.
The institute also questioned the necessity of a 1,200 MW state-owned thermal plant under the GPP-2 project, warning that Ghana’s current installed capacity already exceeds demand growth and long-term foreign exchange risks and stranded assets could result from committing to large thermal infrastructure.
“Gas-to-Power “75% Cost Reduction” is Overstated. The Budget asserts that switching from
light crude oil to domestic natural gas will reduce generation costs by at least 75% which is technically
and economically overstated. Although gas is less expensive than liquid crude oil as source of fuel,
take-or-pay commitments, processing fees, transportation costs, inefficient plants, and dollar-based
invoices are all included in the total cost of generation. Additionally, a large number of Ghana’s thermal
plants operate below optimal efficiency, requiring more gas to generate the same amount of power.”
The institute also highlighted limitations in the Cash Waterfall Mechanism (CWM), stating that while projected revenue declarations rise from GH¢950 million to GH¢1.7 billion, the system only redistributes funds without improving operational efficiency or ensuring debt recovery from independent power producers (IPPs).
“Lack of Clarity on ECG Private Sector Participation (PSP). Private Sector Participation (PSP)
is portrayed as a significant reform for ECG. Yet, the budget does not include any technical or
commercial KPIs, such as targeted loss reduction, feeder reliability, meter installation targets, or
collection efficiency improvements. The PSP process runs the risk of becoming just another
administrative exercise with little real-world application if these benchmarks are not met,” he noted.
ICEG observed that the budget favours thermal assets while underinvesting in renewable energy and smart infrastructure, which are key to diversifying Ghana’s energy mix.
To address these gaps, ICEG recommended reforms including a performance-based CWM, a foreign exchange hedging policy for gas contracts and IPP payments, and a structured PSP framework with measurable KPIs.
“ICEG believes that by incorporating these recommendations into the implementation scheme will enhance efficiency and ensure value-for-money in these initiatives eafor 2026,” Mr. Abaidoo added.
