ICEG warns Ghana’s 2026 energy budget may fail without real reforms
The Institute of Climate and Environmental Governance (ICEG) says Ghana’s 2026 energy plans could fall short if government does not introduce deeper reforms. Although the institute agrees that the budget shows commitment to keeping the lights on, it warns that many of the measures are only temporary and do not fix the core problems in the energy sector.
Kwesi Yamoah Abaidoo, ICEG’s Policy Lead for Climate Finance and Energy Transition, said the government’s proposals focus mainly on short-term relief. “These actions keep the lights on, but they don’t fix the underlying technical issues,” he explained. He listed problems such as weak transmission lines, inefficient power plants, high system losses and old metering systems that continue to slow down the sector.
ICEG said the government’s plan to pay arrears, restore letters of credit and settle invoices may improve cash flow for a while but will not solve long-standing operational challenges. It warned that simply clearing debts without improving efficiency will not make the sector financially stable in the long run.
The institute also raised concerns about the proposed 1,200 MW state-owned thermal plant under the GPP-2 project. According to ICEG, Ghana already has more installed capacity than it currently needs, and adding a new thermal plant could create stranded assets and increase foreign exchange risks due to dollar-based contracts.
ICEG also questioned the claim that using more domestic gas will reduce generation costs by 75 percent. The institute said the figure is unrealistic because thermal inefficiencies, processing charges, transport costs and dollar-denominated agreements still make electricity production expensive.
It further criticised the Cash Waterfall Mechanism (CWM), explaining that although projected revenue is expected to rise from GH¢950 million to GH¢1.7 billion, the mechanism only shares revenue among sector players. It does not reduce technical losses or guarantee debt repayment by independent power producers (IPPs).
On private sector participation in the Electricity Company of Ghana (ECG), ICEG warned that the initiative may not have much impact unless it includes clear performance indicators such as improved feeder reliability, reduced losses and better revenue collection.
ICEG also noted that the budget focuses more on thermal power than renewable energy and smart technology. The institute recommended a performance-based CWM, a foreign exchange hedging plan for gas and IPP payments, and a well-structured PSP framework with measurable KPIs.
ICEG believes adopting these reforms will improve sector efficiency and ensure value for money as Ghana implements its 2026 energy plans.
