In the recent power crisis, the electricity consuming public did not play any direct role in managing the crisis. They neither decided on the “dum” nor on the “sor”. The EGC was running the show and, perhaps unduly, bore the brunt of customer dissatisfaction. To be sure, this practice is not new or uniquely Ghanaian. It is the conventional model where utilities supply as much as they can to meet projected but nonresponsive electricity demand. And in the event of a supply shortfall, power is rationed until normalcy returns.
This model is not tenable anymore. The regulatory framework must provide appropriate incentives for consumers to help manage the power challenges. A mandatory direct load control for industrial consumers in return for a more reliable electricity and a downward review of the current special load tariffs is a good starting point.
Over the past three decades there have been five episodes of power crises with increasing duration and severity. In each case, the source of the supply shortfall is traced almost exclusively to insufficient spare capacities. And in each case, we responded by installing more generation, transmission and distribution capacities. Despite our best efforts, as the former President later acknowledged barely four months after his upbeat State of the Nation Address on the power situation, “we are living dangerously because our redundancy is small”.
This raises the questions of how much spare capacity is required and whether the said spare capacity makes economic sense.
The West African Power Pool recommends a 25% spare capacity. GRIDCo’s “2016 Power Supply Plan” suggests if all planned capacities come online, we may meet the 25% requirement from this year onwards. This is potentially good but it is worth noting that the major electricity companies in the world are moving away from the overreliance on spare capacity because it is not cost effective.
The economics aside, it is important to recall that “dumsor” started because of poor rainfall to feed the hydro plants and lack of fuel to run the thermal plants. Moreover, the load shedding data shows that the average electricity shortfall was 28% in 2015 and went up to 32% in the months of February and March. In short, as costly as it is, a 25% spare capacity will not guarantee a “dumsor” free Ghana.
A complementary approach is a demand response programme which encourages consumers to lower or shift electricity usage whenever “dumsor” threatens. The options are many but a careful look at the current bulk generation charges, end-user tariffs and the cost of direct load control (DLC) infrastructure procurement, installation and operations suggest that a DLC for industrial consumers is economically viable. Under such a DLC scheme, instead of a total blackout, ECG or GRIDCo can remotely switch off pre-identify installations (air conditioners and pumps) upon short notice to industrial consumers who signed on the scheme.
The available data suggests industrial electricity demand was 860MW as of December 2015. If 25% of this demand is directly controlled, a DLC for industrial consumers could provide additional system reliability of scales equivalent to the AMERI power plant.
However, the success of this scheme depends crucially on sufficient uptake. One possibility is to make it mandatory following the example of South Korea. The challenge however is a mandatory DLC is likely to face opposition from both the ECG and the industrial customers.
On the ECG’s part, there are potential missing money problems. For example, a successful deployment of a DLC may reduce the number of hours some of the inefficient power plants are dispatched. While this may reduce overall cost, ECG is contractually obliged to pay capacity charges even when the affected power plants are not dispatched. In addition, under the current tariff structure, industrial consumers are on special load tariffs, which are much higher than the residential and non-residential tariffs. This means for each unit curtailed under the DLC, ECG could be losing revenue.
One avenue to get ECG on-board is a reduction in the spread among the various segments of the tariff structure.
Reducing the spread also has the potential to secure a buy-in from industrial consumers, who have consistently argued for a downward review of the special load tariffs. Indeed, the ECG in its tariff review submission to the PURC echoes a similar view. It therefore appears that a mandatory DLC, which comes with significant tariff structure review, may face much less resistance than otherwise.
As the recent power outages emphasised, the traditional focus on building more and more spare capacity is unreliable and increasingly unsustainable. A mandatory direct load control presents a complementary opportunity for consumers to play active role in managing the power challenges. It is high time the PURC, the Energy Commission and the Ministry of Power played their respective and collective parts to make this a viable proposition to the ECG, the industrial consumers and the general public.
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