Energy Efficiency in Ghana

by Monkgogi Bonolo Otlhogile

Ghana has a middle-income economy with a projected GDP per capita of $3,718.40 (World Development Indicators, 2014). Policy makers in Ghana refer to it as a ‘maturing economy’ and have argued for Ghana to continue its investment in services, an efficient energy system, and mass media and telecommunications (African Development Bank). Unlike many African countries, Ghana does not rely on fossil fuels for its energy uses but instead depends on hydropower for 97% of its energy needs (World Bank Indicators, 2014). However, in 2007, Ghana discovered large reserves of natural gas and oil and there has been fear that coupled with recent hydrological shocks, which caused intermittent energy supply, Ghana will turn to its fossil fuels to be the solution to its energy problems.

Seventy-two percent of Ghanaian households have access to electricity and the Ghanaian government provides relatively cheap electricity to the many industries situated in the West African country (World Bank Indicators, 2012). However, Ghana finds its energy supply continuously depleted by end-use energy inefficiency, both residential and industrial. Ghana has a large second-hand market, which has exacerbated Ghanaian residential energy inefficiency as many of the appliances bought on this market pre-date energy efficiency standards. Dramani and Tewari estimated that a total of $30 million could be saved annually if all Ghanaian households relinquished their second-hand refrigerators through the Refrigerator Rebate Programme initiated by the Ghanaian government (2013). The government has instituted stringent energy standards for both domestic and imported goods and has begun mandating energy efficiency in industries through better equipment management (Dramani and Tewari). The Ghanaian government has also attempted to promote efficiency among end-users through national efficiency campaigns, fairs, conferences, and exhibitions. However, Dramani, Tewari, Apeaning, and Hollander argue that Ghanaian end-users have not been given adequate price signals that would incentivize energy efficiency as the price of energy is highly subsidized by the Ghanaian government (2013).

Industrialization, with special attention paid to manufacturing, has the ability to decrease dependence on imports, create economic growth, and improve living standards by increasing the value of raw materials that are in abundance in Sub-Saharan Africa. However, successful industrialization is contingent on sufficient, stable and affordable energy but in a continent plagued by weak policy, old and unmaintained infrastructure, and little to no regulation, energy inefficiencies are caused and exacerbated by both producers and consumers. Apeaning and Thollander (2013) used qualitative and explorative research methods to investigate the barriers and driving forces of energy efficiency improvements in the industrial region of Tema in Ghana. The authors used relevant economic theories and semi-structured interviews with firms and energy stakeholders in the region to investigate the presence and causes of the energy efficiency gap. They found that the energy efficiency gap was a result of a lack of implementation of energy efficiency standards. Apeaning and Thollander believe that the low implementation is caused by market barriers such as access to capital and further exacerbated by weak government energy frameworks and a lack of awareness among management. However, the authors also found that market factors such as cost reduction were highly associated with the implementation of energy efficiency standards. Apeaning and Thollander, therefore, assert that the Ghanaian government should address issues of policy frameworks, market forces, and awareness regarding energy efficiency standards to combat the barriers to increased energy efficiency in the Tema industrial region of Ghana.

Apeaning and Thollander’s study comprised three parts: a literature review of relevant theories, a semi-structured interview of firms, and a semi-structured interview with energy efficiency stakeholders within the Tema industrial area. The authors’ literature review surveyed neo-classical economics, organizational economics, behavioral theory, and organizational theory to help them categorize barriers and driving forces of energy efficiency in Tema. Energy efficiency barriers were classified as economic, organizational, and behavioral barriers, while the driving forces to energy efficiency implementation were classified as market-related, energy policies related, and organizational and behavioral factors. With this information, the authors developed a survey and visited 76 companies, chosen randomly. However, they were only able to use data from the 34 firms that agreed to participate in the study. Of the 34 firms, 29% were steel and aluminum factories, 23% were food processing plants, 21% were plastic producers, 9% were petrochemical and chemical firms, and 18% were categorized as other (cement, fluorescent lamp, textile, and paper manufactures). None of the firms had energy managers so the interviews were conducted with a member of management who dealt with energy, such as a technician or engineer.

During the first part of the interview the respondents were asked about their firm’s energy management strategies as well as barriers and driving factors to energy efficiency implementation. In the second part, they were asked to fill out a structured questionnaire which ranked current implementation strategies, their source of energy efficiency information, and barriers and driving factors for energy efficiency implementation within their firms as outlined by SPRU in 2000. The semi-structured interview with the stakeholders was conducted with two energy experts from the Energy Commission, Ghana (EC) and one expert from the Energy Foundation, Ghana (EF). EC is a government regulatory body in charge of consumer and producer energy efficiency and EF is a company invested in promoting energy efficiency in Ghana. This interview was conducted to gain insights into the current state of energy efficiency standards and their implementation in Ghana’s industrial region of Tema. With the information collected from their study, the authors hoped to answer five major questions: Is there an energy efficiency gap in Tema, what are the barriers inhibiting the implementation of energy efficiency standards, what are the driving forces that are causing firms to implement energy efficiency standards, how is energy managed in these industries, and how do firms obtain information regarding energy efficiency standards?

Apeaning and Thollander created an energy management profile of each firm by asking questions regarding their energy information system. The interviews showed that 24 out of the 34 firms metered their electricity use at both sites and buildings while the rest only metered electricity use of their equipment. The authors found that only six firms used monitoring and targeting schemes for electricity management while only one firm had conducted an energy audit in the last 10 years. This gave the authors reason to believe that the answers given during the interview and the questionnaire were based on intuition and not a quantitative and/or qualitative energy audit. Apeaning and Thollander found that the majority of the firms did not have a standardized energy policy or management strategy. However this was to be expected as none of the firms had personnel assigned to manage energy on a day-to-day basis. The authors found that electrical equipment was ranked as the highest implemented energy efficiency measure. Though power factor correction is deemed the most cost-effective energy efficiency measure, 17 firms had not implemented this measure. They also found that none of the firms had automatic switch-off systems to turn off idle equipment or motion/occupancy-sensor lights to switch off when unneeded. However, over 30 firms had replaced tungsten lamps with compact fluorescent lamps, regulated their boilers, and used efficient motors to drive compressors and pumps.

Apeaning and Thollander found that all respondents agreed that an energy efficiency gap existed within their respective firms. Out of a possible 22 barriers, the authors found that a “lack of budget funding” was considered the most important barrier, followed by “access to capital” and “other priorities for capital investments”. The respondents attributed these barriers to the lack of awareness or interest by top management regarding energy efficiency improvements in their firms. The first two barriers suggest that there is a lack of capital within these industries which is decreasing implementation while the third barrier suggests that there is a hidden cost to energy efficiency to which firms are not willing to allocate funds. The authors also found that the respondents felt the technology was inappropriate at this site, technical risks, the lack of technical skills, conflicts of interest within the company, cost of production disruption/ hassle/inconvenience, cost of identifying opportunities, analyzing cost effectiveness and tendering, and a lack of time or other priorities were important barriers to energy efficiency. Out of a possible 17 drivers, the authors found that the highest ranked driving force for energy efficiency implementation was “cost reductions resulting from lowered energy use”, followed by “threats of rising energy prices”, “energy efficiency requirements by Ghanaian government”, and “long term energy strategy”. The first two forces were market-related and the respondents explained that they felt that investing in energy efficiency could help protect their firms from volatile energy prices and supply deficiencies in Ghana. The authors found it interesting that government energy efficiency standards were ranked so highly since Ghana has no strong laws or standards for industrial energy use.

The Electricity Company of Ghana (ECG) was deemed the best source of industrial energy efficiency information while information from equipment suppliers was ranked second. However, the respondents did state that energy efficiency programs by ECG and EC were normally intensive when there was an energy crisis in Ghana. Apeaning and Thollander suggest that this type of reactive energy policy will not address the energy efficiency problems within the Tema region. The authors assert that their interviews have allowed for them to identify three main areas that need to be address to increase industrial energy efficiency in Ghana: a lack of policy framework, a lack of access to funds, and a lack of management awareness. To combat these issues, Apeaning and Thollander suggest that the Ghanaian government needs to deregulate the energy market, as price signals will provoke the adoption of energy standards. They also suggest that decreased interest rates and better project management would tackle the issue of funding, and that an energy culture needs to be fostered to address the lack of awareness surrounding energy efficiency in middle and upper management. However, the authors concede that further studies should include equipment dealers, financial organizations, local government, and trade associations/unions to develop a holistic body of knowledge for energy efficiency implementation.

Apeaning, R.W., Thollander, P., 2013. Barriers to and driving forces for industrial energy efficiency improvements in African industries–a case study of Ghana’s largest industrial area. Journal of Cleaner Production 53, 204-213.

Dramani, J.B., Tewari, D.D., 2013. Electricity End-Use Efficiency in Ghana: Experience with Technology, Policies and Institutions. Mediterranean Journal of Social Sciences 4, 669–681.

African Development Bank., 2012. Republic of Ghana Country Strategy Paper: 2012-2016. Web. 11 Mar. 2014.

World Bank., 2014. Energy in Africa. Web. 13 Mar. 2014.

World Bank., 2014. World Development Indicators 2014. Web. 7 Mar. 2014

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