Leveraging the Free Zones Act to boost Ghana’s electricity exports

To address Ghana’s growing surplus in electricity generation and transform it into a profitable resource, Dr. Elikplim Kwabla Apetorgbor, a prominent power systems economist, has recommended that Ghana licenses its Independent Power Producers (IPPs) under the Ghana Free Zones Act.

This strategic move, he argues, would strengthen Ghana’s position in the West African electricity market, alleviating the financial strain of paying

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With an installed capacity of 5,300 megawatts (MW) and a peak domestic demand of only 3,600 MW, Ghana’s surplus in electricity generation currently incurs significant costs. These arise primarily from "take-or-pay" contracts, which obligate the Electricity Company of Ghana (ECG) to pay for unused power, contributing to an estimated sector debt of around $2 billion.

Dr. Apetorgbor suggests that by leveraging the Free Zones Act, Ghana can optimize its resources for regional markets, relieving ECG of this financial burden and turning surplus capacity into an economic advantage.

The Ghana Free Zones Act, enacted in 1995, was initially aimed at boosting trade and manufacturing through tax breaks, duty exemptions, and streamlined regulations. Adapting this framework for IPPs could reduce costs and incentivize power exports to high-demand neighboring countries, including Burkina Faso, Togo, and Mali. Dr. Apetorgbor proposed several key measures to enable this transformation:

Tailoring a Capacity Market Framework for Export Goals
Developing a capacity market with pricing mechanisms designed for regional competition would allow IPPs to offer electricity at attractive rates within the West African Power Pool (WAPP). Additionally, infrastructure investments in transmission systems would be essential to facilitate efficient exports.

Amending the Free Zones Act to Include IPPs
An amendment recognizing IPPs as eligible entities under the Free Zones Act would grant them access to valuable tax and regulatory incentives. This includes a corporate tax holiday of up to ten years, followed by a reduced 15% tax rate, and import duty exemptions on essential components, further reducing operational costs.

Formalizing Bilateral Agreements for Stable Revenue
Dr. Apetorgbor emphasized that the Ministry of Energy should secure power purchase agreements with neighboring countries to ensure steady demand for Ghanaian electricity, stabilizing revenue for ECG. Export quotas, which require Free Zone entities to export at least 70% of production, could align IPP operations with regional market demands.

Streamlining Regulatory Processes
By utilizing the Free Zones Act’s simplified regulatory framework, IPPs would face fewer bureaucratic obstacles, allowing them to respond more swiftly to shifting demands within WAPP.

Dr. Apetorgbor concluded that these strategies would not only relieve ECG’s financial liabilities but also attract significant foreign direct investment (FDI). With enhanced infrastructure and operational efficiency, Ghana could position itself as a competitive electricity exporter within the West African market, leveraging the Free Zones Act’s investor-friendly policies to boost infrastructure, production capacity, and overall economic growth.