Ghana Joins the ‘Coal’ War

In August 2015, Ghana plans to commence the construction of a 2x350MW supercritical coal fired power plant at Ekumfi Aboano in the Central Region. The Project is a joint venture between the Volta River Authority (VRA) and the Shenzhen Energy Group from China, and is scheduled to be completed by year 2020. The second phase after 2020 is planned to see expansion of capacity to 2000MW. While the mainstream media seems to be silent on the matter, due to either sheer disinterest or a possible lack of sufficient information, some environmental advocates are mounting some resistance to the project in the background.  It is however expected that the issue will gain more currency as we inch towards the project start date. As such, this article seeks to shed some light on the potential ramifications of such a project in Ghana and the angles both proponents and those opposed could consider as the discourse ensues.

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Environmental Considerations: The first concern that the public raises with regards to coal is its horrible environmental footprints where it has been and is still being deployed. Though it is anticipated that Ghana’s supercritical coal fired plants will employ High –Efficiency Low- Emissions (HELE) technologies, some salient environmental concerns are still posed by environmental advocates. It will be very good if the VRA could come public as to how they plan to address these challenges. Currently, some of the concerns being raised by the anti-coal and pro-environmental advocates include the following:

  1. How does the VRA plan to safely dispose the possible 5million tonnes of ash that would be discharged from the plant per year
  2. How will the ash disposal approach prevent the potential contamination and pollution of underground water tables with poisonous chemicals
  3. What are the plans to handle the particulate matter (PM10) that would be discharged from burning coal as well as hazardous gases like carbon monoxide, nitrous oxides that are injurious to human health? This could have implications of respiratory tract infections for residents of the Ekumfi Aboano area. Remember the plants are not zero emission plants.
  4. Has the project any Carbon Capture and Storage (CCS) provisions?
  5. How will the implementers handle the potential effect on the turtle breeding grounds close to the project area?
  6. The plant would also discharge hot water into the sea that will change the ocean temperature hence threatening aquatic life. How can such an effect be mitigated or prevented altogether?

To cap the environmental concerns, it is important to note that the concept of clean coal technology is a relatively new one. As such, it is important to find out if the VRA has conducted due diligence and witnessed firsthand the implementation of all their proposed mitigation measures elsewhere.

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Pumping Coal into the Economy:  The Energy commission’s outlook for power generation in Ghana was to increase installed capacity from about 2,830 MW in 2014 to almost 3,250 MW, all by thermal additions in 2015; and install 5000MW by end of 2016. However, current installed capacity in 2016 stands at 2,846.5. In order to reduce the gaping planned capacity deficit, government has gone for international thermal power contracts totaling at least 1,370 MW.

In view of the capacity deficits as outlined above, any attempts to increase generating capacity is ordinarily a welcome idea. However, the economic considerations and opportunity costs remain far more relevant in a country of very limited financial resources. The proposed coal plant is projected to cost USD1.5billion. That notwithstanding, there are planned coal imports of 2million tonnes a year from South Africa. Even with coal prices tumbling and at a very low price of 42.25 dollars per short tonne, Ghana would have to cough up at least USD84.5million annually to keep this proposed plant useful.

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Currently, the most challenging problem for Ghana’s power generators is the issue of procuring feedstock. As a result, with the good news of ENI’s Offshore Cape Three Point gas fields coming on stream in 2018 thereabouts, one would expect that the national power generator will concentrate its investments on gas thermal plants. It therefore remains curious that Ghana plans to send out over USD84.5 million of scarce foreign exchange every year to South Africa, when this could be well spent on our domestic natural gas to the same end of generating power, with far less environmental consequences. There must certainly be a superior economic argument for this coal thermal project; which the VRA must be willing to share with Ghanaians.

Coal Geopolitics: Ghana’s decision to go coal has potential geopolitical and international economic consequences which must be considered carefully. Ghana has very close ties with the IMF and the World Bank. As such, it is instructive to note that In July 2013, the World Bank made the announcement that it had agreed to a new energy strategy and was now limiting financing for coal fired power plants to only include “rare circumstances”. This approach is consistent with their climate change and sustainable development goals. It can therefore be conceivable that, though we’re beginning this coal journey with the Chinese, we cannot in the future turn to the Bretton Woods for support, say by way of procuring coal or mitigating any challenges that may occur along the line.

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But the flipside of this is that, Ghana must begin to strongly streamline our relationships with the major emerging economies, Brazil, India, Russia, China and South Africa – the BRICS – if we seek to tow the coal line. On July 2014, the BRICS announced the formation of the New Development Bank (NDB), an entity set to compete directly with the World Bank.  The NDB has a pretty huge credit clout; with $100 billion and another $100 billion as a reserve currency pool.  Its main focus will be lending for infrastructure projects and other projects that will assist the development of member countries.  The NDB will also remove the control of the World Bank and other western funds over developing nations – since they will eventually go into assisting non member countries.

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Immediately, one may say that Ghana is safe on that front, since the project is being co-funded by a BRICS state – China and coal fuel is being provided by another BRICS country – South Africa. But the dynamic that must be considered here is this; both China and South Africa are coal mining countries. Hence it makes  economic sense for them to use their local fuel source for their power generation needs and to export any excesses. But in the instance of Ghana, why should we be spending our foreign exchange on coal, when we can focus on developing with what is locally available – natural gas, as indicated above? Is it that our gas finds are not sufficient to power our long term energy needs? If that is the case, how do alternatives such as Liquefied Natural Gas imports compare with the prospect of coal – when it comes to both financial cost and the environment?

Future of Coal:

Currently, there is a struggle for the soul of coal on the global front. While the coal industry experts and organizations see a long term future, the anti-coal activists are doing all they can to see coal mines shut down.

From the pro-coal campaign front, the argument is made that there are increasing coal exports and global demands are still breaking records.  According to them, there are over 1000 coal-fired power plants being planned and constructed around the world – with Ghana’s being one of them. This implies that once there is a consistent demand for coal, the economic incentive will outdo any attempts to collapse the coal market, hence defeating the proposition that all coal plants and associated infrastructure will soon become ‘stranded assets’.

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The preceding argument notwithstanding, the anti-coal front persists with their coal divestment campaign. In May2015, Reuters reported that French insurance company, AXA, had joined the growing line of companies and not-for-profit organizations to announce divestment from the coal industry. AXA indicated that it would pull out of investments worth €500 million (US$552.7 million). The AXA announcement followed those from the likes of Credit Agricole, Bank of America and Societe Generale, all of which are either cutting back or stopping altogether their investment in the coal industry. The environmentalists and anti-coal lobby maintain that when there are no more sufficient investments in coal, then the demand for it will no longer exist.

In the short term, the war on coal would look like one that should serve Ghana better, since it plans to import coal. The current coal divestment campaign is seriously driving down coal prices on the global market to 12-year lows according to Reuters. This is not good news for coal producing countries but on the other hand, it’s a welcome development for a country like Ghana that intends to import all of its planned coal needs. However, in the long term, the effect of continuous coal divestment will mean the unavailability of the product – since miners will pull out when the industry becomes unprofitable. The implication will be that coal fired plants in Ghana will have to pay a premium for the few coal supplies available or shut down.

As things stand, it is a battle between ethical/environmental considerations and the economic incentives for coal production. The success or otherwise of either side in the global coal battle will mean a lot for Ghana’s planned investments in coal thermal plants.

It is therefore crucial that the VRA and other national stakeholders follow the global developments with keen interest and up-to-the-minute updates in tandem with making major decisions with regards to this proposed project.

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Jason Tutu

Jason Tutu is a creative, dynamic and motivated professional with loads of initiative and enthusiasm. A trained biochemist, he practiced as an environmental and development researcher with almost a decade of experience before making a foray into the terrains of business and organizational development, communication and negotiation. He studied Business Administration (Project Management Option) and later trained as a Project Management Professional (PMP) after taking a professional course with the Ghana STOCK EXCHANGE (GSE) in Securities Trading and INVESTMENT Advisory. Thriving in fast-paced environments, Jason is a prolific writer, trainer, researcher, business developer, networker, and very much a ‘big picture’ strategic thinker.

One thought on “Ghana Joins the ‘Coal’ War

  • March 21, 2016 at 12:51 pm
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    Hi Jason,
    I’m Nii-Baah, a Master of Energy student at the University of Auckland in New Zealand. I enjoyed every bit of your article. It has depth and it is well-researched. I have interests in climate control and renewable energy and will like to link up with you for more update on this issue. Looking for a project to work on that might benefit Ghana but haven’t found one yet. Perhaps, this could be something I could look into further. Thanks.

    Reply

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