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Power Sector Faces Imminent Collapse — Report

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The Institute For Energy Policies and Research (INSTEPR) has observed that the power sub-sector in 2021 and beyond will need critical attention and resources, including huge capital investments to save it from collapse.

The institute in its 2021 Outlook and Expectations in the Energy Sector report stipulated that if no action was taken, the indebtedness within the power sector could reach $12.52 billion by 2023 which would be about 18.7 per cent of the country’s current Gross Domestic Product (GDP).

DEVTRACO THE PELICAN
“The Independent Power Producers (IPPs) have an unpaid invoice of up to $1.44 billion as of September 2020, according to CIPDiB. This debt keeps growing though the Cash Waterfall Mechanism has been implemented since April 2020.

“The total revenue collected by ECG from consumers is not enough to meet the invoices from various stakeholders in the value chain. This is mostly to do with the technical and commercial losses experiences in Transmission and Distribution,” the report said.

As a result, the report said there were transmission losses of 4.7 per cent this year, which was 1.8 per cent higher than the projected losses of 2.7 per cent.

Distribution losses have also increased to 26.63 per cent as against the regulatory benchmark of 23.2 per cent, according to the report.

Report

The report also highlighted some of the key areas in the economy that needed attention in 2021 and beyond and suggested actions that needs to be taken by the government.

It said in 2021, the government would need to give a clear indication on how the new policy of ‘TAKE AND PAY’ would be implemented for the existing Power Purchase Agreements (PPA) which had ‘TAKE OR PAY’.

DEVTRACO THE PELICAN
“Since the Minister of Finance made the announcement on the floor of Parliament that all TAKE OR PAY agreements will be converted to TAKE AND PAY, nothing to that effect has happened. This has created uncertainty for investors in the power sector,” the report said.

The report also suggested that there was an urgent need to produce more clean energy in line with the Paris Climate Agreement and the Sustainable Development Goal (SDG) 7.

“The renewable energy can serve small to medium communities through embedded generation. Other renewable energy such as Wind, Waste to Energy and Mini-Hydro Dams should be supported by the government in the coming year,” it said.

Oil and gas

On the oil and gas front, the said the government is projected to lose over 51 per cent of the oil revenue expected in the year due to low crude prices and reduced production.

It said, “Most of the International Oil Companies in the country halted operations, notable among them is Aker Energy who suspended their work programme.”

It added that the upstream sub-sector was experiencing a slowdown in exploration activities prior to the Covid-19 pandemic.

“There are challenges ahead in 2021 for the Oil and Gas industry since the world Economy post Covid-19 is forecast to slow down until 2022 for recovery. Crude prices are around $50.78 and projected to be around $45 in the next 12 months according to Energy Information Administration (EIA).

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