File photo of an oil rig processing oil and natural gas from reservoirs beneath the seabed
A joint analysis by the United Nations Development Programme (UNDP) and KPMG, an auditing firm, has affirmed the Government’s strategic shift from light crude oil to domestically produced natural gas for power generation.
The report, however, stressed that the initiative’s ultimate success hinged on implementing transparent tariff-setting mechanisms and cost-reflective tariffs.
The report highlighted the potential the transition had to drastically cut electricity production costs and bolster energy security.
The report comes amid the government’s plan to leverage increased gas production from the Offshore Cape Three Points (OCTP), Jubilee, and TEN fields for power production as announced in the 2026 budget by the Finance Minister.
The minister also announced recent infrastructure upgrades and new agreements with partners to boost gas supply, paving the way for the construction of a new 1,200-megawatt state-owned thermal power plant starting in 2026.
While the move from crude oil to gas is projected to reduce generation costs by approximately 75 per cent, the UNDP-KPMG report cautioned that those savings must be effectively managed across the entire electricity value chain to ensure sustainability.
The report noted that for the benefits to fully materialise, transparent tariff-setting mechanisms and cost-reflective pricing would be essential to ensure the financial viability of sector players.
The principle underscored the need for the Public Utilities Regulatory Commission (PURC) to adopt pricing models that accurately reflected the actual costs of production, transmission, distribution, and supply.
That approach was critical to maintaining the operational and financial health of the Electricity Company of Ghana (ECG), the Ghana Grid Company (GRIDCo), and independent power producers, while also preventing undue financial pressure on the national budget.
The government’s parallel initiatives, including feasibility studies for mini-hydroelectric plants on the Red Volta and other southern rivers, align with broader goals to diversify the energy mix and integrate renewable sources.
However, the stability of the entire sector, as highlighted in the report, remained fundamentally linked to a financially sound tariff structure.
The analysis suggested that without cost-reflective tariffs, the sector could face renewed cycles of debt and underinvestment, potentially undermining the gains from the cheaper gas-based generation.
It said transparency in the tariff-setting process was also cited as vital to building public trust and ensuring that pricing adjustments were understood and accepted by consumers.
