SREP/SC.13/4

April 29, 2015

Meeting of the SREP Sub-Committee

Washington D.C.

Wednesday, May 13, 2015

Agenda Item 4

SREP INVESTMENT PLAN FOR GHANA

PROPOSED DECISION

The SREP Sub-Committee, having reviewed document SREP/SC.13/4, SREP Investment Plan

for Ghana,

a) endorses the investment plan as a basis for the further development of the projects

and programs foreseen in the plan and takes note of the request for USD 40 million in

SREP funding. The Sub-Committee requests the Government of Ghana, in the

further development of the proposed projects and programs, to take into account

comments made at the meeting and any additional written comments submitted by

Sub-Committee members by May 29, 2015, and to respond in writing to questions

raised during the meeting and in subsequent written comments;

b) reconfirms its decision on the allocation of resources, adopted at its meeting in

November 2010, that all allocation amounts are indicative for planning purposes and

that approval of funding will be on the basis of high quality investment plans and

projects;

c) approves a total of USD 1,510,300 in SREP funding as preparation grants for the

following projects to be developed under the investment plan:

i. USD 899,800 for the project entitled, Renewable Mini-grids and Stand-alone

Systems (AfDB);

ii. USD 610,500 for the project entitled, Net Metered Solar PV for SMEs and

Lighting Project (AfDB);

d) takes note of the estimated budget of USD 400,000 for MDB project preparation and

supervision services for the project entitled, Renewable Mini-grids and Stand-alone

Systems (AfDB), and approves USD 200,000 as a first tranche of funding for such

services;

e) takes note of the estimated budget of USD 400,000 for MDB project preparation and

supervision services for the project entitled, Net Metered Solar PV for SMEs and

Lighting Project (AfDB), and approves USD 200,000 as a first tranche of funding for

such services;

f) further takes note of the estimated budget of USD 450,000 for MDB project

preparation and supervision services for the project entitled, Utility-scale Solar PV/

Wind Power Generation (IFC).

Republic of Ghana

CONTENTS

PREAMBLE: THE ENERGY& CLIMATE NEXUS IN GHANA 10

1. COUNTRY CONTEXT 131. introduction 13

2. eneRGY SecToR bRief 152.1. overview 152.2. electricity Demand and Supply 162.3. electricity Tariffs 182.4. The Rural electrification challenge 202.5. Gender and energy 22

3. national energy policy and institutional framework 233.1. energy policy & Strategic framework 233.2. institutional framework 24

2. RENEWABLE ENERGY SECTOR CONTEXT 311. Renewable energy potential and Development Status 311.1. hydropower 321.2. Solar 321.3. Wind 331.4. biomass and Waste-to-energy 351.5. Wave & Tidal energy 35

2. legal and Regulatory framework for Renewables 36

3. barriers to Renewable energy Development and Mitigation Measures 38

3. CONTRIBUTION TO NATIONAL ENERGY ROADMAP 41

4. PRIORITISATION OF STRATEGIC INVESTMENT AREAS 45

5. PROGRAM DESCRIPTION 481. program objective 49

2. expected outcomes 49

3. Description of program components 503.1. project 1: Re Mini-grids and Stand-alone Solar pV Systems 50

3.2. project 2: Solar pV based net Metering with battery Storage 523.3. project 3: utility-Scale Solar pV/Wind Generation 543.4. project 4: Technical assistance to Scale-up Renewable energy 553.5. potential project 5: utility-scale biomass power Generation 57

4. program implementation arrangements 58

5. program co-benefits 60

6. additional Development activities 62

6. FINANCING PLAN 63

7. ENVIRONMENTAL AND SOCIALASPECTS 651. applying environmental and Social Safeguards on the Renewable energy Mini-grids and Stand-alone Solar pV Systems project 65

2. applying environmental and Social Safeguards to the Solar pV based net metering with battery storage and utility-scale solar pV/wind power generation projects 66

3. anticipated environmental and Social impacts 68

8. MONITORING AND EVALUATION AND KNOWLEDGE MANAGEMENT 70Strengthening Monitoring and evaluation 70

Results framework 71

3. Responsibilities and M&e-related tasks 73

4. Strengthening Knowledge Management and lessons Sharing 744.1. program level 744.2. project level 75

9. RISK ASSESSMENT 76

ANNEXES 80

ACRONYMS AND ABBREVIATION

AA Action AgendaAAF Automatic Adjustment Formula AEI AfricanElectrificationInitiativeAFD AgenceFrançaisedeDéveloppementAfDB AfricanDevelopmentBankAREED AfricanRuralEnergyEnterpriseDevelopmentAUSAid AustralianAgencyforInternationalDevelopmentBMZ GermanFederalMinistryforEconomicCooperationandDevelopmentBPA Bui Power AuthorityCIF ClimateInvestmentFundsCL&BCP Community Lighting & Battery Charging Facility Project CWE China Water ElectricDFID UKDepartmentforInternationalDevelopmentDP DevelopmentPartnerDSA Debt Sustainability AnalysisDSO DistributionSystemOperatorsE&S EnvironmentalandSocialEC Energy CommissionECG ElectricityCompanyofGhanaECOWAS Economic Community Of West African StatesEHS Environmental,HealthandSafetyENDEV EnerGIZingDevelopmentProgramEP EnclavePowerEPA EnvironmentalProtectionAgencyEPRAP PovertyReductionActionPlanforGhanaESIA EnvironmentalandSocialImpactAssessmentESMF EnvironmentalandSocialManagementFrameworkESMP EnvironmentalandSocialManagementPlanESIA EnvironmentalandSocialImpactAssessmentESMP EnvironmentalandSocialManagementPlanEU EuropeanUnionFiT Feed-inTariffsGCSA GovernmentconsentandsupportagreementGDP Gross Domestic ProductGEDAP GhanaEnergyDevelopmentandAccessProjectGHS Ghanaian cedi currencyGIS GlobalInformationSystem,thenlaterGeographicalInformationSystemGIZ GermanAgencyforInternationalCooperationGOG GovernmentofGhanaGRA GhanaRevenueAuthorityGRIDco GhanaGridCompanyGSGDA GhanaSharedGrowthandDevelopmentAgendaHSAP HydropowerSustainabilityAssessmentProjectIFI International Finance Institution

ILS Information and Lessons SharingIP InvestmentPlanpg31,thenlaterInvestmentProgramIPP IndependentPowerProducersKfW KreditanstaltfürWiederaufbau(GermanDevelopmentBank)KITE KumasiInstituteofTechnology,EnergyandEnvironmentLPG LiquidpetroleumgasM&E MonitoringandevaluationMCC MillenniumChallengeCorporationMDB MultilateraldevelopmentbankMFANL DutchMinistryofForeignAffairsMFANO NorwegianMinistryofForeignAffairsMOP Ministry of PowerNCCP National Climate Change PolicyNEDco NorthernElectricityDistributionCompanyNFI National Finance InstitutionNIB NationalInvestmentBankNMIMR Noguchi Memorial Institute for Medical Research PPA Power Purchase AgreementPPBME PolicyPlanning,Budgeting,MonitoringandEvaluationPPMED PolicyPlanningMonitoringandEvaluationDirectoratePSR Power Sector ReformsPRG PartialRiskGuaranteePUE ProductiveuseofenergyPURC Public Utility Regulatory CommissionPV SolarPhotovoltaicsRAP Resettlement Action Plans RAED Renewable&AlternativeEnergiesDirectorateRE Renewable energyREA Renewable Energy AuthorityREF Renewable Energy FundRE-FiT RenewableEnergyFeed-inTariffsRET Renewable Energy Technology RPF ResettlementPolicyFrameworkSDC SwissAgencyforDevelopmentandCooperationSECO SwissEconomicDevelopmentCooperationSE4ALL SustainableEnergyforAllInitiativeSHS Solar home systemsSLAP Solar Lanterns Promotion Program SME SmallandMediumsizedEnterprisesSNV NetherlandsDevelopmentOrganizationSREP Scaling-upRenewableEnergyPlanTA Technical assistanceTSO TransmissionSystemOperatorUNDP UnitedNationsDevelopmentProgramVRA VoltaRiverAuthorityWB WorldBankWRA Wind resource assessment

MAP OF GHANA

FOREW0RD

Ghana is endowed with a wealth of renewable energy sources. When exploited sustainably, these resources can provide much needed additional energy capacity through the creation of solar, wind, biomass, hydro, wave and tidal power. The financing required to harness this potential in order for the country to become an “energy economy” however, is substantial. The Scaling-up Renewable Energy Program in Ghana Investment Plan (SREP-Ghana IP) is therefore key to the Government’s strategy aimed at unlocking financing opportunities to accelerate the development of a sustainable renewable energy sector.

The projects to be identified for financing in this IP are expected to significantly contribute to the Government’s goal of universal access to electricity by 2020. The IP is aligned with national and regional policy benchmarks such as the Strategic National Energy Plan, the National Energy Policy, the Energy Sector Strategy and Development Plan, and the ECOWAS Renewable Energy Policy. This alignment, coupled with the ability to work in tandem with other partners that similarly encourage a low-carbon pathway, such as the Sustainable Energy for All initiative, increases the likelihood of demonstrable impact in the daily lives of ordinary Ghanaians. Anchored around three prioritized investment areas and a programmatic technical assistance component, the SREP-Ghana IP is expected to yield the following impacts:

1. Expanded electricity access to over 600,000 women, men, businesses and community services, the majority of whom/which reside in the remotest parts of the country;

2. Increased annual electricity output from renewables by 115 GWh; 3. Reduced greenhouse gas emissions by 76,664 tons of CO2 per year;4. Increased productive uses of renewable energy in SMEs; and5. Streamlined and enhanced sector policies by identifying and addressing key

barriers to ensure the scaling-up of renewable energy.

Continuous dialogue and thoughtful comments and suggestions received from partners DFID, GIZ, KITE, NORAD, SE4ALL, SECO, SNV, and UNDP, among others, demonstrate the level of stakeholder engagement and the relevance of the IP to the coordination and implementation of renewable energy initiatives in Ghana. Achieving the targets of the program must be a collective effort among all public stakeholders in conjunction with the private sector. The Ministry of Power is committed to providing the required leadership and prioritizing the realization of the SREP-Ghana IP. I wish to convey my gratitude to the SREP National Taskforce, the multilateral development banks and the Ministry of Finance for actively contributing to the development of the SREP-Ghana IP. I further commend this plan which sets the stage for the fast-tracking and scaling-up of renewable energy initiatives in a pragmatic and sustainable manner

Dr.KwabenaDonkorMinister,MinistryofPower

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EXECUTIVE SUMMARY

“Climate variability and change constitute a major threat to national development. […] It leads to increased financial cost of provision of economic and social infrastructure, as well as resettlements of peo-ple […]. The challenge is to turn climate change and variability into an opportunity to expand national output and productivity and em-bark on systemic protection programs.”Ghana Shared Growth and Development Agenda II (2014-2017)

INTRODUCTION

Ghana is already experiencing the impacts of climate variability. The mean annualtemperaturehasrisen1°Cperdecadesince1960.Monthlyrainfallhasdecreased2.4%perdecadeduringthesameperiod.Theseclimate-inducedchangesarestressingthecountry’s vulnerable sectors: agriculture, coastal zones/marine ecosystems, waterresources and energy production.Climate projections show thatGhanawill becomehotterandwetterduringthewetseasonanddrierduringthedryseason.Economy-wide,itisestimatedthatby2050,annualrealGDPisprojectedtobe1.9to7.2%lowerthaniftherewasnoanthropogenicclimatechange.

Ghana contributes little to global emissions of greenhouse gases with CO2 emissions a mere0.4tonspercapitain2010.Nevertheless,asaresponsiblememberoftheglobalcommunityandasameansofdiversifyingtheenergymixandprovidingmodernenergyservice to its populace,Ghana is committed to investing in renewable energy (RE)sources.Clearly,business-as-usualisnotanacceptableoptioninmakingitsenergy

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systemsclimate resilientwhileconcomitantlymeeting the rapidgrowth inelectricitydemand.ThereforetheGhanaNationalClimateChangePolicy(NCCP)issuedin2013,statedthat“TheNCCPwillensureaclimate-resilientandclimate-compatibleeconomywhich addresses a low-carbon growth path for Ghana while achieving sustainabledevelopment.”TheScaling-upRenewableEnergyPrograminGhana(SREP-Ghana)support and the co-financing it will leverage is crucial in achieving this importantnationalpolicygoal.

ENERGY SECTOR CHALLENGES

Ghana’senergysectorisheavilydependentonbiomassandoil,whichaccountforcloseto90%ofthecountry’sprimaryenergysupply.Inadditiontooilandgas,hydropowerisan importantsourceofelectricity.Thegenerationcapacity iscurrentlyabout3,000MWofwhich54%ishydropower.Electricitydemandgrowthhasbeenabout10%perannum.Expansionplanningstudiesestimatethatthrough2026,electricitydemandwillneedtoincreasenearlythree-foldto28,000GWhcomparedto2010consumption.And,accordingtostudies,thegenerationcapacityneedstoincreasetoabout4,200MWby2026tomeetthisdemand.

Rapid electricity demand growth and the highly variable hydropower production,has caused severe electricity shortages that has led to load shedding and forcedthe Government to shift to oil-fired generators. TheWorld Bank (WB) assessment,“EconomicsofAdaptationtoClimateChange”indicatesthatlossesinhydropowerdueto climate change could be up to $70million per annum.

InGhana, about70%of thepopulationhasaccess toelectricity, among thehighestconnectionratesinsub-SaharanAfrica.Theremaining30%,orabout5millionpeople,willbeexceedinglydifficultandcostlytoconnectthroughagridnetworkasmanyareinremote,inaccessibleareas,includingislandsandlakesidecommunities.Off-gridandmini-gridoptionsareexpected tobe the technologyofchoice formeetingelectricityneedsofthemajorityoftheunservedpopulation.

Ghana’senergysectorvisionisadeveloped“energyeconomy”withreliablehighqualityenergyservices.ThefollowingnationalenergypolicygoalswerethereforeestablishedbytheGovernmentofGhana(GoG)inordertoachievethisvision:

• • Universalaccesstoelectricityby2020(recentlymovedforwardto2016)from 70% today (though access in rural areas is only 40%);

• 5,000MWofgenerationcapacityby2020(recentlymovedforwardto2016);

• Ten%contributionofrenewableenergy(excludinghydro100MWorlarger)intheelectricitygenerationmixby2020;and

• Accesstoliquidpetroleumgas(LPG)by2020forfifty%ofthepopulation.

TheGoGhassetrenewableenergytargetstocontributetothe2020nationalgoals,amongwhichare:50-150MWutility-scalesolar;150-250MWutility-scalewind;20-26

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MWutility-scalebiomass/waste;30-42mini-grids;30,000solarhomesystemsand2millionsolarlanterns;and150-300MWsmallandmediumhydro.

RENEWABLE ENERGY ACHIEVEMENTS

The country’s policy commitment towards renewable energy is strong and has beentranslated into actions to support renewable energy development.

TheRenewableEnergyAct2011,Act832wasapprovedtoscale-upGhana’srenewableenergy capacity. The Act calls for the creation of an enabling investment climate;indigenous technology capacity building; enhanced public education; and regulationof theproductionandsupplyofwood-andbio- fuel. Inorder to realize thesegoals,necessaryregulatoryandpolicyinstrumentswereestablished,mostnotably:agridcodeforrenewableenergy;renewableenergyfeed-intariffs(FiT);guidelinesforarenewableenergypurchaseobligation;adraftrenewableenergyPowerPurchaseAgreement(PPA);abioenergyandpolicystrategy;andaframeworkfortheRenewableEnergyFund(REF).Importtaxexemptionswerealsograntedforsolarphotovoltaics.Meanwhile,in2012,theGoGredirectedexistingkerosenesubsidiestowardssolarlighting.

TheMinistryofPower(MoP)isworkingwiththePublicUtilityRegulatoryCommission(PURC)andtheEnergyCommissiontodeveloptheregulatoryframeworkformini-gridsand stand-alone electrification interventions. Nevertheless, significant barriers withrespecttofinancing,regulatoryandin-housecapacityexist,impedingtheabilitytofullyharnessthecountry’srenewableenergypotential.

Privateandpublicsectorsupportforrenewableenergyisemerging,howevermuchofitisatanascentstageofdevelopmentorimplementation:

• Solar photovoltaics. Twenty-five net-metered systems with a capacity of 7MWhavebeenconstructedandthereareplanstoscalethisupto200,000.TheSolarLanternsPromotionProgramexpectstodistributetwomillionsolarlanternsby2020,80,000ofwhichwereprocuredin2013,whileover50,000weresubsidizedandsoldat50%of thecost. TheEnergyCommissionhasissued licenses and permits to thirty utility-scale solar projects with a totalcapacityof1,835MWandaconstructionpermit toa20MWprojectwhichisunderconstruction.Pendingsuccessoftheaforementionedinitiatives,thecountry’s solar capacitywould reachabout60%of today’speakdemand.

• Wind.Windresourceassessmentsareongoingat15siteswithapotentialofabout 1100MW power generation.

• Small hydropower.Ghanaisestimatedtohave17mediumand22mini/smallhydropower sites with most sites exceeding 10 MW. The total capacity isestimatedtobeat800MW.Feasibilitystudiesareongoingforatotalcapacityof800MWat19sites.

• Biomass. TThe Ministry of Energy and Petroleum commissioned a report,

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entitled,“AssessmentoftheFinancialLandscapeforBiomassPowerandMini-gridsinGhana”thatrevealedthattherearenumerousclusteredagroandwoodprocessingsitesgeneratingalargeamountofbiomasswaste.Alocalbiomassenergydeveloperhasnowacquiredenvironmentalandsitingclearancepermitsfora6MWbiomasspowerproject.Municipalitiesalsogeneratelargequantitiesof waste which could be used.

• Wave and tidal energy.AGhanaiancompanyisinstallingapilot14MWtidalwavepowerplantattheconfluenceoftheVoltaRiverandtheGulfofGuinea,Ada Foah.

CONSTRAINTS TO RENEWABLE ENERGY DEVELOPMENT

In spite of strong policy commitments and the move to establish regulatory andcontractualframeworksandundertakefeasibilitystudiesandresourceassessments,actualinvestmentsinthesectorhavebeenlimited.Ghanaiscommittedtoovercomingtheremainingbarriersneededtotransformitsvisionandcommitmenttopower.SREPsupportwillbeinstrumentalinovercomingmanyofthesebarriersandpermittingtheenormousrenewableenergypotentialtoberealised.

Principalconstraintstorenewableenergydevelopmentinclude:

• Inadequacies in the regulatory, contractual and tariff frameworks. contractual and tariff frameworks. One of the greatest hindrances is the necessity torenegotiatethefeed-in-tariffeveryotheryearafterthe initialtenyearperiod.This is risky to investors asmost renewable energy projects have lifespanswhichexceed20years,whiledebtfinancingalonemayrequiremorethantenyears. Incentives to negotiate tariffs that are lower than the gazetted FiT but for a longer term will address this problem.

• Challenging investment climate.Thefinancialsectorandfinancingtermsandconditionscurrentlyavailable,aswellasthemacroeconomicchallenges,makerenewable energy investments challenging. High commercial interest rates,limitedtenorloans,highinflation,andcurrencydepreciationarealldeterrentstopotential investors.Supporting the financial sector to provide packages that are more attractive is therefore key.

• Uncertainty of available resources. Inadequate credible data on availablerenewable resources at prospective sites impedes potential investors fromselecting such sites. Ongoing resource monitoring programs are expected to provide the necessary information to eliminate this uncertainty.

• Limited technological capacity. There are limited experienced personnel tocompletetechnologyandfeasibilityassessments,aswellasinvest,construct,operateandmanagerenewableenergypowerplants.The MoP is obtaining

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technical assistance to build critical middle level manpower for the industry.

• Insufficient renewable energy experience.Nationalinstitutionshavelittleornoexperienceinrenewableenergy.Asaresult,powersectorentities,regulators,financiers,domesticinvestors,andnationaltechnologyandserviceprovidersareallenteringasectorwhichisvirtuallyunknowntothem.Asmoresector-relatedprojectsdevelop,experienceandconfidenceinrenewableenergywillincrease. Targeted knowledge transfer, capacity building and partnerships with experienced international counterparts are therefore imperative to introduce the sector to the relevant institutions so they may properly leverage its benefits.

PROGRAM DESCRIPTION

TheGoG,representedbytheMoPandsupportedbytheAfricanDevelopmentBank(AfDB)ledaparticipatoryprocessinvolvingmanystakeholderstoformulatetheSREP-GhanaInvestmentPlan.TheprocesstookintoaccountpreparatoryworkdonebytheSREPNational TaskForce (NTF) on keybarriers, bottlenecks, andopportunities aswellastheconclusionsofseveraltechnicalconsultationsandvariousmeetingswiththestakeholdersinDecember2014andFebruary2015.ASREPNTFretreatinMarch2015,aswellasanindependentreviewandon-lineconsultationinApril2015,helpedfurtherperfecttheInvestmentPlan.

TheGoGappliedbothSREPandnationalscreeningcriteriatoprioritisetherenewableenergy technologies and investments. Two broad categories of technologies wereconsidered:gridsupplyandoff-gridelectrification.Thetechnologyoptionsweresolar,wind,smallhydro,biomass,andwaveandtidalpower.Thescreeningresultedinthefollowingrankedorderofrenewableenergyoptions:(1)Renewableenergymini-gridsand stand-alone solar PV; (2) Utility-scale biomass; (3) Solar PV netmetering withstorage;(4)Utility-scalesolarandwind;(5)Smallhydropower;(6)Tidal/wavepower.

SREPsupportwasinitiallyconsideredforthefourhighestrankedoptions—mini-gridsand stand-alone renewable-based electrification, utility-scale biomass, net-meteredphotovoltaics, and utility-scale solar and wind—with complementary technicalassistance.However,after furtherconsiderationdrivenbytheSREPfunding limitofUSD40million,theGoGdecidedtoseekalternativefundingfromtheGreenClimateFund or request supplemental SREP funding for the utility-scale biomass option.Consequently,SREP support is sought for the following four projects:

1. Project1-Renewableenergymini-gridsandstand-alonesolarPVsystems;

2. Project2-SolarPVbasednetmeteringwithbatterystorage;

3. Project3-Utility-scalesolarPV/windpowergeneration;and

4. Project4-Technicalassistancetoscale-uprenewableenergy.

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PROGRAM DEVELOPMENT OBjECTIVE

TheprogramobjectiveistoassisttheGoGinmeetingits10%renewableenergytargetby2020andcontributetomeetingitsuniversalelectricityaccessgoal.TheSREPfundswillhelpcreatetheenablingandsustainingenvironmentforrenewableenergyscale-up and leverage additional private and public financial resources to the renewableenergysector.Theprogramwillmainstreamapproachesthathaveprovensuccessfulin scaling-up renewable energy investments inGhana and adopt best internationalpractices. Itwillovercome thekeybarriers thathaveconstrained renewableenergydevelopment inGhana.

InaccordancewithSREPmodalities,thegoalswillbeachievedthroughacoordinatedapproachwhichisessentialfortransformationalchange.TheSREPsupportwillleadto increased investments in renewable energy including leveraging financing fromothersources;catalysingstrongprivatesectorengagement;creating thenecessaryenablingenvironment,especiallybyovercomingtheweaknessesanduncertaintiesinthe regulatory andfinancial environment; supportinggender inclusivedevelopment;andengenderingan informedandsupportivecommunity.

EXPECTED RESULTS

TheSREPInvestmentPlanexpectstoachievethefollowingprincipaloutcomes:

• Increasedaccesstoaffordableandreliableelectricityservices,inparticularforislandandlakesidecommunities,toachievetheuniversalaccesstoelectricitygoal;

• Greatersupplyofelectricityfromrenewableenergiestocontributetogoalofobtaining 10%of electricity from renewable energy sources by 2020;

• Improvedlegalandregulatoryframeworksandcapabilitiesofkeyinstitutionstoreducefinancialandcommercialrisks,therebywelcomingsubstantiveprivatesectorparticipationinallaspectsofrenewableenergydevelopment;

• Moregender-equitableaccesstomodernenergyservicesandtoemploymentopportunities in renewable energy enterprises;

• Additional financial resources mobilized following improvements in theinvestment climate for renewable energy; and

• ReducedGHGemissionscomparedtothebusiness-as-usualcase.

DESCRIPTION OF THE INVESTMENT PROjECTS

TheSREP-GhanaIPwillfocusonthefollowingthreeinvestmentprojects:

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Project 1: RE mini-grids and stand-alone solar PV systems: Theobjectiveof thisprojectistoencouragesustainablepublicandprivatefinancingforscaling-uprenewableenergymini-gridsandstand-alonePVsystemstoachievetheGoG’suniversalaccesspolicybyelectrifyinglakesideandislandcommunitiesinGhana,withaspecialfocusongender.Specifically,theprojectwillresultinpublicsectorinvestmentin55renewablemini-gridsandprivatesector investment instand-alonesolarPVsystemstobenefit33,000households,1,350schools,500healthcentresand400communities.Therewillbeassociatedtechnicalassistanceandimplementationsupport.TheAfDBwillbethe leadmultilateraldevelopmentbank(MDB)forthe implementationalongwiththeMoP on behalf of the GoG.

Project 2: Solar PV based net metering with battery storage: Theobjectiveofthisprojectistodevelopacomprehensivenetmeteringprogramandthedeploymentofatleast15,000unitsofroof-mountedsolarPVsystemstoreducetheeconomiccostofpoweronsmallandmedium-sizedenterprises(SMEs)andhouseholdsandincreaserenewableenergycontributionsintheelectricitygenerationmixby25-30MW.Therewillbeassociatedtechnicalassistanceandimplementationsupport.TheAfDBwillbetheleadMDBfortheimplementationalongwiththeEnergyCommissiononbehalfofthe GoG.

Project 3: Utility-scale solar PV/wind power generation: Theobjectiveofthisprojectis to assist theGoGovercomekeybarriers thatprevent thegrowthandexpansionoftheutility-scalesolarPVandwindmarketinGhanabycatalyzingthefirstproject-financedutility-scalerenewableenergyplants,demonstratingtheGhanaianREsectorpotential to financiers and helping attract further investment in the future. IFC (theWorldBankGroup’s InternationalFinanceCorporation)willbethe leadMDBfor theimplementation.Thisprojectisexpectedtoleverageadditionalsourcesofco-financingfromtheprivatesectorandfromtheAfDBprivatesectorwindow.

TECHNICAL ASSISTANCE

Technical assistance is required for the implementation of the investment projectssupported in this investment plan. In addition, broader sector-wide assistance isneeded.Sector-widetechnicalassistanceisprovidedthroughastand-alonetechnicalAssistance Project.

Project 4: Technical assistance to scale-up RE: Theobjectiveof thisproject is toassisttheGoGanditskeypartnersintheprivateandfinancialsectorstoovercomekeytechnical,financial,regulatoryandinstitutionalbarriersthatinhibitthescaling-upofrenewableenergyinvestmentsinthecountryandmorespecificallycouldconstrainthesuccessful implementationoftheflagshiprenewableenergyprojectsfinancedunderthisprogram.TheAfDBwillbethe leadMDBforthe implementationofthisproject,whiletheEnergyCommissionwillbetheimplementingagencyonbehalfoftheGoG.

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FUNDING SOURCES AND USES The total estimated cost of the SREP-Ghana Investment Plan is USD 230 millionwith a SREP contribution of USD 40 million. The Investment Plan program seekscontributions from theGoG,AfDB, IFC, other development partners, private sectorinvestors,financiersandbeneficiaries.Thefinancingplandetailingsourcesandusesof funds is shownbelow:

RATIONALE FOR SREP FUNDING

Given the importanceof energy toGhana’s economicgrowth and the achievementofitsdevelopmentgoals,thecountrymustexpanditspowersupplytomeetgrowingdemand. It iscommitted todosobymobilizing itsdynamicprivatesectorandbydiversifying its energy portfolio in a manner that addresses both global and localenvironmental concerns.

TheGovernmenthasexplicitlyacknowledgedthatastrategythatutilisesindigenoussourcesofrenewableenergyhasthepotentialtoreducetheriskofsupplydisruptions,avoidpriceshocks,reducepressureonthelocalandglobalenvironmentandimprovesocioeconomicdevelopmentoutcomes.Asaresult,theGoGhasenactedanumberofhighlevelpolicyreformsandisintheprocessoftransformingpolicyintentintoreality.SREP support will be a cornerstone of the country’s ability to achieve its nationalrenewable energy goals.

Increases investor confidence.SREP’sendorsementoftheGovernment’scommitmenttowardsrenewableenergyisanimportantsignaltoboththedevelopmentandprivatesector communities that the country is not only serious about embracing RE, butis also capable of making it beneficial to all parties involved. It therefore providesconfidence and encouragement to other development and private sector partnerstoprovidecounterpart and/or investment funding. Its resourceswill be essential to

SREP Program Financing Plan (in USD million)Project SreP GoG AfDB* IFc DPs PI&B** totalre Mini-grids and stand-alone solar PV systems

17.5 8.0 27.0 0.0 12.0 18.5 83.0

Solar PV based net metering with battery storage

12.5 8.0 15.0 0.0 12.0 45.5 93.0

Utility-scale solar PV/wind power generation

10.0 0.0 10.0 10.0 0.0 20.0 50.0

technical assistance 0.0 0.0 1.5 0.0 2.5 0.0 4.0 totAl 40.0 16.0 53.5 10.0 26.5 84.0 230.0

* Including the AfDB private sector window and the Sustainable Energy Fund for Africa (SEFA) Trust Fund** Private, financiers, beneficiaries

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mitigatethefinancialrisksandleveragefundsnecessaryforREinvestmentatascalenot contemplated previously.

Reduces regulatory, institutional and contractual barriers. SREP resources are also necessarytoensureacoordinatedapproachinaddressingtheremainingregulatory,institutionalandcontractualbarriers topermit theprivatesector topartnerwith theGovernmentand/orotherdevelopmentpartners inachieving theREgoals.

Provides necessary technical support and builds capacity.Giventhecountry’slimitedinformationaboutitstotalavailablerenewableresources,aswellastechnicalexpertisetomakeitsownassessments,theSREPwillalsoworkwithitspartnerstoattractthenecessarytechnicalexpertisetoundergoand/orcompletenecessaryREassessmentstofillthecurrentinformationvoid.Itwillfurtherbuildoffinternationalbestpracticestoenhancehumanandinstitutionalcapacitiesnecessarytocreateasustainablesector.

CONCLUSION

Ghana has an opportunity to propel its future socioeconomic development following a low-carbon pathway as it is estimated that excluding large hydropower, modern RE systems currently contribute to only an estimated 0.3% of the country’s total installed capacity despite the country’s significant potential. The GoG is therefore committed to achieving its development goals while fulfilling the SREP intent of scaling-up deployment of RE solutions to increase energy access and economic opportunities. Their appropriate exploitation has a great potential to contribute to achieving the national goals of universal access to modern energy services and 10% share of renewables in the country’s energy mix. In order to successfully do this however, it requires an adequate understanding of the country’s total potential available renewable energy, an enabling investment and regulatory environment and increased RE-specific capacity. SREP support will help the country overcome these barriers.

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PREAMBLE: THE ENERGY & CLIMATE NEXUS IN GHANA

TheSREP-GhanaInvestmentPlan(SREP-GhanaIP)isinlinewiththenation’sstrategyfor renewable energy (RE) development as stipulated in the following documents:GhanaSharedGrowthandDevelopmentAgenda(GSGDA)IIfor2014-2017,NationalEnergyPolicyof2010,andGhanaNationalClimateChangePolicyof2013.TheSREP-GhanaIPbringsvariouspowersector,renewableenergyandclimatechangepoliciestogetherintoasinglecohesivedocumentandproposesastrategicdevelopmentpathleading to greater utilization of renewable energy.

Ghanahasalreadyexperiencedan increase inmeanannual temperatureof1°Cperdecadesince1960.Monthlyrainfalldecreasedabout2.4%perdecadeduringthesameperiod1. Increasedclimatevariability isalreadyaffecting thecountry’seconomyandhouseholds.Theimpactsplacestressonthecountry’svulnerablesectors:agriculture,coastal zones/marine ecosystems, water resources, and energy production. Suchimpactsareexpectedtobecomegreaterasclimatechangeeffectsincrease.Climateprojectionsshow thatGhana isprojected tobecomeevenhotterandwetterduringthewetseasonanddrierduringthedryseason.Ifnothingisdonetohelpmitigatetheeffectsofsuchclimatechanges,by2050,annualrealGDPisprojectedtobe1.9to7.2%lowerthanitwouldbeotherwise2.

The GoG recognizes that climate change could hinder the ambitious developmentgoalssetforthintheGhanaGSGDAIIandstatesthat:“Climate variability and change constitute a major threat to national development. […] It leads to increased financial cost of provision of economic and social infrastructure, as well as resettlements of people […]. The challenge is to turn climate change and variability into an opportunity to expand

1 GhanaStrategySupportProgram,PolicyNote.InternationalFoodPolicyResearchInstitute,2012.2 EconomicsofAdaptationtoClimateChange,Ghana.WorldBank,2010.

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national output and productivity and embark on systemic protection programs”3.

TheGoGisthereforecommittedtomainstreamingclimatechangeintokeyplanningprocessesonthenational,regionalandlocallevel.TheNationalClimateChangePolicy(NCCP)2013,notesthat“Ghana has demonstrated impressive economic development over the past decades, attaining the status of a middle-income country. However, future growth is still threatened by its high vulnerability to climate change. […] The NCCP will ensure a climate-resilient and climate-compatible economy which addresses a low-carbon growth path for Ghana while achieving sustainable development. […] There is a need to increase the country’s energy security and “climate-proof” infrastructure, to effectively adapt to the impacts of current climate change variability and withstand any future impacts.”4

Ghana’senergysectorhasalreadyshownsignsofsusceptibilitytoclimatevariability,particularlytheeffectofhighlyvariableprecipitationpatternsonhydropowerproduction.Abouttwo-thirdsofelectricitygenerationinthecountryisfromhydropower,whichputsthe sustainability andstabilityof electricityproductionat stake.Thedroughtof theearly1980s(1980to1983)calledintoquestionthenation’scontinueddependenceonhydroelectricpower.Reducedhydrogenerationresultingfromrecentdecreasinglevelsof rainfall have led to severepower shortages,which culminated in load shedding.Blackoutsandpowerrationingcausedby lowwater levels inhydropowerelectricityforced the GoG to shift to fossil fuel thermal generation and increasingly turn to thermal projectstocompensateforreducedcurrentcapacityandtoincreasefuturecapacity.ThegeneralequilibriummodellingusedintheWorldBankdocumenttitled“EconomicsofAdaptationtoClimateChange”indicatesthatlossesinhydropowerduetoclimatechangecouldbeupto$70millionperannum5.Thissituationcallsfordiversifyingtheenergymix—tappingintorenewableenergysourcessuchaswind,solar,tidalwaves,waste to energy and biomass.

Currently,Ghanacontributeslittletoglobalclimatechange,withCO2 emissions at just 0.4tonspercapitain20106.However,theNCCPacknowledgesthat“emissions from the energy and transport sectors represent the fastest growing source of greenhouse gas emissions. With a growing rural and urban population, associated energy requirements will lead to an increased use of wood fuels, electricity and oil products, the main energy sources in Ghana. […] The inefficiency of infrastructure associated with energy and industrial processes, especially energy conversion systems, results in the emission of unnecessary amounts of GHGs, thereby increasing total national emissions.” Clearly,business-as-usual is not an acceptable option.Hence, theNCCP’s 10th focal areafocuses on “minimizing greenhouse gas emissions” with the following principle:

3 GhanaSharedGrowthandDevelopmentAgendaII(2014-2017).GhanaNationalDevelopmentPlanningCommission.www.ndpc.gov.gh.18April2015.4 GhanaNationalClimateChangePolicy.MinistryofEnvironmentScience,TechnologyandInnovation,2013.5 EconomicsofAdaptationtoClimateChange.WorldBank,2011.http://www.worldbank.org/en/news/feature/2011/06/06/economics-adaptation-climate-change. 18 April 2015.6 World DataBank. World Bank. http://databank.worldbank.org/ddp/home.do?Step=1&id=4. 15 April2015.

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“Recognizing that efficient energy use and cleaner energy technologies contribute towards economic development, as well as result in green development and optimal national emission rates.”

GiventheimportanceofenergytoGhana’seconomicgrowthandambitiousdevelopmentgoals, the countrymust continue to expand its power-generation capacity tomeetgrowingdemand;butitmustdosoinasustainablemannerthatdiversifiestheenergyportfolio.TheGovernmentrecognisesthatastrategythatutilisesindigenoussourcesofrenewableenergyhasthepotentialtoreducetheriskofsupplydisruptions,avoidprice shocks, reduce pressure on the local and global environment, and improvesocioeconomicdevelopment outcomes.

Ghanahasanopportunitytopropelitsfuturesocioeconomicdevelopmentfollowingalow-carbonpathway.Low-carbondevelopmentcanbefacilitatedbydynamicpublicandprivatesectorsthatareactiveinrenewableenergydevelopment.GiventhatGhanaisendowedwithanabundantarrayofrenewableenergyresources,theirappropriateexploitationhasagreatpotentialtocontributetoachievingthegoalofuniversalaccesstomodernenergyservices.

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COUNTRY CONTEXT

1. INTRODUCTIONGhanahasasurfaceareaof228,539km2andatotalpopulationofapproximately25.8millionpeople,withapopulationgrowthrateofapproximately2.2%.AlmosthalfoftheGhanaianpopulationliveinruralareas.Animportantproportionofthisruralpopulationliveinscatteredandremoteareas,someinisolatedislands.Thediffusednatureofruralcommunitiesjustifies,toalargeextent,theneedtoconsideradecentralizedenergyapproach as an important cost effective option formeeting energy requirements inthose areas.While the rural population remains important, the urban population isgrowingrapidlyatarateof3.5%.Thiscallsforequalattentiontobepaidtoarapidlygrowing energy demand in urban areas7.

Ghanahasasurfaceareaof228,539km2andatotalpopulationofapproximately25.8millionpeople,withapopulationgrowthrateofapproximately2.2%.AlmosthalfoftheGhanaianpopulationliveinruralareas.Animportantproportionofthisruralpopulationliveinscatteredandremoteareas,someinisolatedislands.Thediffusednatureofruralcommunitiesjustifies,toalargeextent,theneedtoconsideradecentralizedenergyapproach as an important cost effective option formeeting energy requirements inthose areas.While the rural population remains important, the urban population isgrowingrapidlyatarateof3.5%.Thiscallsforequalattentiontobepaidtoarapidlygrowing energy demand in urban areas.

Thepoliticalsituationisstableandthecountrycontinuestoconsolidatedemocraticgovernance,characterizedbyanopensociety,vibrantmediaandstrongpublicdialogue

7 The World Fact Book. Central Intelligence Agency. https://www.cia.gov/library/publications/the-world-factbook/geos/gh.html. 15 April 2015.

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thathasbeen,inpart,instrumentalincreatinganexceptionallystrongbottom-uppushfor large-scale electrification of communities acrossGhana. As a result,more than70%ofGhanaianhouseholdshaveaccess toelectricity,asignificantlyhigher%agethan most sub-Saharan African countries.8

Ghana’srelativelystrongeconomybenefitedfromaquartercenturyofrelativelysoundmanagement,competitivebusinessenvironmentandsustainedreductionsinpovertylevels.Thecountry’sstrongperformanceculminatedinGhanabeingre-categorizedasalowermiddle-incomecountryinlate2010.In2013,Ghana’sGrossDomesticProduct(GDP)realgrowthratewasestimatedtoreach7.9%,whiletheGDPpercapitawasUSD3,500.GDPgrowthrateisprojectedtohaveexpandedatthesameratein2014.Asexpected, economicgrowth translates togrowingdemand formodern services,whichaccountsfor50%ofGDP.Agricultureandindustryaccountfor22%and29%ofGDP,respectively.9 Goldandcocoaproductionaswellas individualremittances,andmorerecently,oil&gas,aremajorsourcesofforeignexchange.Finally,therisein incomesandgrowingentrepreneurialclassprovidethebasis foravibrantprivatesector.

Over the last two decades, Ghana hasmanaged to decrease the proportion of itsresidents falling below its poverty line. In 1998/99, it is estimated that 39.5% ofGhanaianswerebelowthenationalpovertyline.By2005/06,thisproportiondecreasedto28.5%,10whichstillconstitutesmorethanaquarterofthetotalpopulation.WhileGhana is on track to meet its Millennium Development Goals, poverty among itssubsistence farmers, particularly in the northern parts ofGhana, continues to be asource of concern. Enhanced access to modern energy services will significantlycontributetoaddressingthepovertychallengesfacingthebulkofGhana’ssubsistencefarming community.

IfGhana is toachievebothsignificantpoverty reductionandacceleratedeconomicgrowth, a number of road blocks to the development of energy and transportinfrastructure,humancapital,andnaturalresourcesmustberemoved.Infrastructurebottlenecks are a serious constraint to growth and private sector investment.

Indeed,asamiddle-incomeeconomy,Ghanafaceschallengesofinfrastructuredeficitsand an unstable currency regime,which is partly driven by an imbalance betweenimportsandexports.Thegrowingoilexportearningsandexpandeduseoflowercostgasinelectricitygenerationareexpectedtocontributetoclosingtheimports/exportsgap.TheGovernmentthroughitsMinistryofPowerispursuingaggressivepoliciestoaddress theenergy sector infrastructuredeficit tomakeenergy servicesuniversallyaccessibleand readilyavailable inanenvironmentally sustainablemanner; increasegenerationcapacity;andachieveuniversalaccessby2020.11Sector Brief

8 MinistryofPower,Ghana.9 WorldDevelopmentIndicators(2013)http://databank.worldbank.org/data/views/reports/tableview.aspx10Poverty inGhana. TheBorgenProject, July 2013.http://borgenproject.org/poverty-in-ghana/. 15April2015.11Thecurrentadministrationintendstoachievethistargetby2016.

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2. ENERGY SECTOR BRIEF

2.1. Overview

AccordingtotheInternationalEnergyAgency(IEA),Ghanaconsumedatotalof10.13million tons of oil equivalent (MTOE) in 2012, ofwhich 0.4MTOE consisted of netimports. Total primary energyconsumption inGhanawas0.4 tonsof oil equivalent(TOE)percapitain2012,amongthelowestintheworldandabouttwo-thirdsoftheaverageconsumption insub-SaharanAfrica (0.68TOEpercapita in2012).

Ghana’senergysectorischaracterizedbyheavyrelianceonbiomassandoil,whichincombinationaccountforcloseto90%ofthecountry’sprimaryenergysupply.Biomassisprimarilyusedtomeethouseholdenergyrequirementswhileoilislargelyconsumedinthetransportandpowergenerationsub-sector.AveragedailyoilproductionfromtheJubileefieldincreasedfromabout81,000barrelsin2012toaround91,000barrelsin2013(i.e.about12%increase).12Inadditiontooilandgas,hydropowerconstitutesanimportantsourceofelectricityforthecountry.Thetotalinstalledgenerationcapacitystoodatabout3,000MWattheendof2014,54%ofwhichcamefromhydropower.13

Inorder tosustain itscurrenteconomicperformance,Ghana’senergysector visionistodevelopan“energyeconomy”tosecureareliablesupplyofhighqualityenergyservicesforallsectorsoftheGhanaianeconomy.Inthisregard,theGoGhasdefinedthefollowingnationalpolicygoalsfortheenergysector:

• Universalaccesstoelectricityby2020(recentlymovedforwardto2016);

• 5,000MWofgenerationcapacityby2020(recentlymovedforwardto2016);

• Ten%contributionof renewableenergy (excluding largehydrowhichhasaninstalledcapacityofmorethan100MW)toelectricitygenerationmixby2020;and

• Accesstoliquidpetroleumgas(LPG)by2020forfifty%ofthepopulation.Ghana has a national average electrification rate ofmore than 70%.However, thisnationalaveragemasksstrikingurban-ruraldisparitiesasonly40%ofruralhouseholdshave access to electricity, significantly impacting productive activities and localeconomicdevelopment.14 Extension of the grid to some of the remaining remote un-electrifiedcommunitiessuchasthoseonislandsorotherwiseisolatedisdifficultdueto geographical and financial constraints.

Furthermore, the country is currently experiencing its worst power crisis in manyyears,withfrequentloadsheddingseriouslyaffectingitspopulation,businessesandindustries.Themainreasonsforthepowercrisisare:(i)continuouslowrainfallinthecatchmentareaoftheAkosomboDamreservoir,forcingthepowerplanttooperateatamuchlowercapacitythantheinstalledcapacityof1,020MW;and(ii)lackofsufficient

122014EnergyOutlookforGhana,EnergyCommission.13MinistryofPowerAnnualReport2014.14MinistryofPowerAnnualReport2014.

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gastopowerthecountry’sthermalpowerplants.Inthefaceofthesechallenges,theMinistryofPowerisprocuringapproximately1,000MWofemergencypowertotacklethe crisis in the short term.

Renewable energy development is expected to contribute towards meeting theambitiousnationalpolicygoalsfortheenergysectorandresolvingthepowercrisisina sustainable way.

2.2. Electricity Demand And Supply

Demandforelectricityacrossallsectorshasbeengrowingonaverageby10%annuallyover a decade. In 2014, the installed generation capacity available for grid supplyreached2,942MWwithrenewableenergy(excludinglargehydro)accountingforonly0.3%(seeTable1).

table 1. InstalledGridElectricityGenerationCapacityasofSeptember201415.

Generation Plant Fuel Type Installed Capacity/MW Share%Hydropower PlantsAkosomboBuiKpong

HydroHydroHydro

1020400160

Subtotal 1580 53.7%Thermal Power PlantsTakoradiPowerCompany(TAPCO)TakoradiIntl.Company(TICO)Sunon-AsogliPower(SAPP)TemaThermalPlant1(TT1P)TemaThermalPlant2(TT2P)CENITEnergyLtd(CEL)TakoradiT3MinesReservePlantOsagyefo Power Barge

LCO/NG/DieselLCO/NG/DieselNGLCO/NG/DieselNG/DieselLCO/NGNGNG/DieselNG

330.0220.0200.0126.049.5

126.0132.040.0

125.0Subtotal 1348.5 45.8%Renewable Energy PlantsVRANoguchiJuabengOilMillOthers(off-grid&net-meteredinstallations)

SolarSolarBiomassSolar

2.500.721.203.80

Subtotal 8.20 0.3%embedded GenerationGenser Power LPG 5Subtotal 5 0.2%total 2941.72 100%

15MinistryofPowerAnnualReport2014.

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In 2013, the total grid electricity generated in the country was 12,874 GWh.16 The projected electricity demand within the constraints of the limited available supplymeansthatthereisboundtobesignificantsupplyshortfallsanytimeapowerplantisturnedoffforscheduledmaintenanceortechnicalfault,resultinginsignificantloadshedding.Basedoncalculations,unmetdemandin2013wasbetween1,700and2,480GWh,whichcouldhaveotherwisebeenmetwiththeinstallationofasupplemental240to330MWoperationalthermalplant.17Movingforward,atotalofabout700-800MWadditionalgenerationcapacityequivalentisneededtocovertheshortfall inadditiontoaminimum20%reservemarginfor2015alone. Investments inrenewableenergycancontribute to reducing theshortfall in installedpowergenerationcapacitywhileensuring a more sustainable energy mix for the future.

The Ghana Generation Master Plan (November 2011) analysed and estimated theevolutionoftheenergyloaddemandfrom1992upto2026usingdifferentscenarios.Figure1belowpresentstheresultsoftheenergydemandforecastusingthesevariousscenarios.

Forthebasecasescenario,thetotalenergyloaddemandisestimatedtoincreasefrom10,000GWhin2010to28,000GWhin2026,representinganaveragegrowthof6.7%.The projected load demand for the base case scenario translates into an increaseinpeakloadfrom1,531MWin2010to4,161MWin2026,representinganaveragegrowthof6.5%.

Figure 1. Energy Load Demand Forecast18.

TheevolutionoftheinstalledcapacitypertypeofunitaccordingtothesameGenerationMasterPlanforGhana(2011)isshowninFigure2asprojectedatthattime.Investmentswereexpectedtobemade incombinedcycleunitswhilethose inhydrogenerationwereexpectedtodecreasesignificantlyduringthestudyperiod.Meanwhile,renewableenergy systems and small hydro were foreseen to be commissioned first with theinstallation of photovoltaic panels and wind farms from 2012 and 2014 and small162014EnergyOutlookforGhana,EnergyCommission.172014EnergyOutlookforGhana,EnergyCommission.18GenerationMasterPlanforGhana,TractebelEngineeringGDFSuez,November2011.

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hydroin2019.Beginningin2020,investmentsinwindparkswereanticipatedtherebyincreasing the shareof renewable energy amounts tobe10%of the total installedcapacityalignedwithGoG’spolicygoals.Inreality,thedevelopmentofrenewableshasbeenmuchslowerwithonly8.2MWdevelopedsofar.

Figure 2. EvolutionoftheInstalledCapacity19

Thecountry’svoltagelevelsrangefrom69kVto330kVforpowertransmission.Thetransmission infrastructure iscomposedofabout5,100km linesand54 transformersubstationsandisinterconnectedwithneighbouringcountries:TogoandBeninintheeast;BurkinaFasotothenorth;andCoted’Ivoireinthewest.Inadequateinvestmentcoupledwithpowergenerationconstraintshaveresultedinanoveralllowpowerfactorand increases in transmission losses,most recentlyofwhichhavebeenabove4%(seeTable2).The integrationof renewableenergysolutionsespeciallydispatchablerenewable energy into the national grid would contribute to a reduction in long line transmission losses.

table 2. Transmission System Losses20.

Year 2008 2009 2010 2011 2012 2013transmission losses as % of gross transmission 3.7 3.8 3.7 4.7 4.2 4.5

2.3. Electricity Tariffs

ThePublicUtilityRegulatoryCommission(PURC)determinesthetariffsofelectricityinconsultationwithkeystakeholderswithintheregulatedelectricitymarketbasedontherate-settingprovisionsofPURCAct538.ElectricitytariffsinGhanahavegoneupover90%acrossallcustomercategories inthelast3years inanefforttoallowtheutilitiestorecovertheircostsandoperateinasustainablemannerwithoutrecoursetoanyformofgovernmentsubsidies.WiththeapplicationoftheAutomaticAdjustmentFormula (AAF)policy, electricity tariffswereadjustedupwardby6.54%onaverage

19GenerationMasterPlanforGhana,TractebelEngineeringGDFSuez,November2011.20GhanaGridCompanyLimited,AnnualReport2013.

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abovethe90%incrementasofendDecember2014.21

ThePURC,inaccordancewiththeprovisionsoftheRenewableEnergyAct2011,Act832,setthefirstRenewableEnergyFeed-inTariffs(RE-FiT) inSeptember2013.TheRE-FiTwasreviewedlessthanayearafterandgazettedon1October2014.ThenewRE-FiTissimilartothefirstRE-FiTbutintroducesanewguidelinefortheintegrationofutility-scalevariablerenewableenergytechnologiessuchassolarPVandwind.Themainprinciplesofthenewguidelineare:

• ThetotalnationwidecapacityforsolarPVandwindplantswithoutgridstability/storagesystemsarelimitedto150MWand300MWrespectively.

• A maximum of 10 MWp (Megawatts peak) per solar PV plant without gridstability/storagesystemsisallowedtobeconnectedtothedistributionsystemat any generation site.

• Amaximumof20MWppersolarPVplantwithoutgridstability/storagesystemsisallowedtobeconnectedtothenationaltransmissionsystem(161kVor330kV)atanygenerationsite.

Thenewapprovedratesforutility-scalerenewableenergytechnologies,asgazettedbythePURCon1October2014arepresentedinTable3below.

table 3. Feed-inTariffsforUtility-scaleRenewableEnergyTechnologies

ScheduleElectricity Generated from Renewable Energy Technologies

FiT (GHp/kWh) Effective 1 October 2014

Maximum Capacity (MW)

Wind with grid stability systems 55.7369300MW

Wind without grid stability systems 51.4334Solar PV with grid stability systems 64.4109

150MWSolar PV without grid stability systems 58.3629Hydro ≤ 10MW 53.6223 No LimitHydro (10MW> ≤100MW) 53.8884 No LimitBiomass 56.0075 No LimitBiomass (enhanced technology) 59.0350 No LimitBiomass (plantation as feed stock) 63.2891 No Limit

[Note: The approved rates indicated in the schedule above are based on the average Interbank Selling Rate as of 30 September 2014 obtained from the Ghana Association of Bankers which was GHS 3.1986 to USD 1.0000.]

DespitethefactthattheseRE-FiTareamongthehighestinrecenttimes,theREsectorisstillnotattractingthedesiredlevelofinvestmentsduetothepoorfinancialstandingof thecountry’sprimarypowerpurchasingutility, theElectricityCompanyofGhana(ECG). TheGoG’s decision not to provide riskmitigation support further increasesinvestors’perceived risk.Finally, theRE-FiT is yet tobecontractedandpaid toan

21 PublicUtilitiesRegulatoryCommission(PURC)GazetteTariffshttp://www.purc.com.gh/purc/node/178

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operationalREprojectalmost2yearsafteritsfirstintroduction.Infact,atthetimeoffinalizingtheSREP-GhanaIP,onlyone20MWsolarPVplant,beingdevelopedbyaChinesecompany,has receivedaconstructionpermit.Thatcompany isdevelopingitsplantwithitsownresources,withoutanydebtleveraging.UntilafewREprojectsaresuccessfullyconstructedandcanthereforedemonstratetheeffectivenessoftheRE regulatory regime, investorsandprojectfinancierswill remain riskaverse to thecountry’sRE incentive framework.

Though thePPAs are typically for a duration of 20 years, theGoGhas decided tofix thevalidityperiod for theFiT to10yearsbecause thecostof renewableenergytechnologies (RETs) is expected to decrease as theymature.Unfortunately, privateinvestorsperceiveitasacommercialriskthatcouldaffecttheirrevenuesprojectionover the lifetimeof their investments.

2.4. The Rural Electrification Challenge

Withmore than 70% of theGhanaian population able to access electricity, Ghanahasoneof thehighestelectricityaccess rates in sub-SaharanAfrica.However, theremainingportionofthecountry’spopulation(approximately5millionpeople)withnoaccesstoelectricityaremostlylocatedinremoteareasthataredifficulttoreachandareunlikely tobeconnected to thenationalgrid.This isdue to theprohibitivecostofextendingthetransmissionanddistributionnetworktothoseareasoftenrequiringexpensiveundergroundcablingand/orcrossingnationalparksand reserves.

Islandandlakesidecommunitiesconstituteasignificantproportionofthepopulationwithnoaccesstoelectricity.ThepreliminaryfindingsofanongoingWorldBank-fundedGeographicInformationSystem(GIS)basedassessmentestimatedapopulationof2.9millionpeople in those islandand lakesidecommunities.Outof thisnumber,about350,000peopleresidinginsome400communitieshavebeenidentifiedtobenefitfromdecentralized renewable mini-grid systems.

DecentralizedREtechnologiesare,inmanycases,themostcompetitiveelectrificationoption for these communities. However, some of these communities have a poorunderstanding of the advantages of decentralized RE systems and request grid-connectedpower.Thishasraisedsomeissuesinthepast,butascommunitiesstartbenefiting from the implementation of theGoG’s renewablemini-grid electrificationprograms, others are now interested in benefiting from such technology. Moreawareness will need to be raised in these communities in the coming years to ensure efficientscaling-upofREpoweredoff-gridelectrification (stand-aloneandmini-gridschemes) on island, lakeside and other remote communities.

Recognizing this situation, to complement grid-based electrification, the GoG hasidentified theneed toaggressively support renewableenergy–basedmini-gridsandstand-alonerenewableenergyinitiativesasapriority.Withsupportfromawiderangeof development partners, including the AfDB, Switzerland’s State Secretariat forEconomicAffairs (SECO)andtheWB,anumberof initiativesarebeingpiloted.Key

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notableinitiativesarepresentedintheensuingsectionsundertheinvestmentbriefsinAnnex1.

Toensuretheenergysectorpolicyobjectivesareoncourseespeciallythoserelatedtoruralelectricityaccessandintensification,theGoGisimplementingtheGhanaEnergyDevelopmentandAccessProject (GEDAP).GEDAP is: (i)supporting thecreationofan enabling environment; (ii) developing performance-based financing instruments;and (iii) providing capacity building. The enormity of the country’s electrificationchallengedemandsinnovativesolutions.LessonsfromtheGEDAPandotheroff-gridelectrificationsolutionsareimportantinputstothenationwideplanningexerciseandtheSREP-GhanaIP(viewedbystakeholdersastheRE-sectorflagshipprogram).

Box 1 Lessons Learnt from GEDAP

Experiencewith ruralelectrificationusingsmall-scalesolarhomesystems (SHS)undertheGlobalProgramonOutputBasedAidcomponentofthemulti-donorfundedGhanaEnergyDevelopment andAccessProject yielded a number of lessonswhichprovidedvaluableinformationfortheSREPInvestmentPlan.Somelessonsrelevanttosmall-scalesolaractivitiesare listedbelow:

• Limited Impact of Subsidies: The projectmade use of a subsidy set as afixed%age of the value of lanterns and solar home systems of various sizes.Whilethissubsidywasinitiallymeanttoincreasetheaffordabilityoflanternsandsystemstoconsumers,inretrospect,itservedinsteadasanincentivetothesolardealerstoactuallyengageinremote,ruralareaswherenonehadactuallydonebusinessbefore.Unfortunately,whileitbecamemoreofatransport-costsubsidyfor theserviceproviders, it failed todrive thecostdown, increaseaffordabilityandsuccessfullypenetratethemarket.

• Willingness to Pay for Solar Home Systems:ThewillingnesstopayforenergyservicesfromSHSinremote,ruralareasofGhanaishigh.ThisisparticularlywellillustratedbythehighdemandforlargeSHSthatcansupplyanLEDcolourTV,reflectingconsumeraspirationsformodernenergyservices.SalesoftheselargeSHSexceededall targetsandexpectationsestablishedatthebeginningoftheproject.

• Financing Packages for Solar PV Suppliers:TherelativelylimitedexpertiseandexperienceofsolarPVsuppliersconstrainstheirabilitytoobtainsustainablefinancing.SupportwasthereforeprovidedtothosesupplierstohelpthemobtaintradefinancingandworkingcapitaltobeabletopurchasesolarPVsystemsinbulkandtobuilduptheircapacityandretailnetworksup-country.

• Sustainability and Maintenance:Ensuringthatrepairsandmaintenancearedonecorrectlyiskeyforthesustainabilityoftheproject.DefaultonthepaymentsoftheloanswasstronglyassociatedwithdeficientSHS,thereforemaintenanceservicesarekeyforthesustainabilityofthesetypesofprograms.Asustainablemodel whereby consumers are charged a maintenance service fee could beexplored.

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• Capacity Building of Rural Banks: The dedicated rural bank solar projectofficerswerecritical to theprocessas theymadeastrong,positive impactontheoperationof theproject. They improved sales, accelerated theprocessingofpaperwork,enabledloanrecoveryandestablishedworkingrelationshipswithlocal dealer representatives. Working closely with project officers in the ruralcommunities to build relevant capacitywas therefore imperative to the overallsuccess of the initiative.

• Non Replicable Business Model:Despite thesuccessof theprojectwhichexceeded itssales targetsandservedmoreruralhouseholds thananticipated,theARB-APEXBankdecidednottocontinueworkinginthissectorpostprojectduetointernalrestructuringandnewpolicyfocus.Asaresult,itwasmoredifficulttosuccessfullyscale-upthebusinessmodel.Workingthroughothergrassrootsfinancing establishments could however ensuremodel replicability and overallprojectsustainability.Whileaprogramhasnocontrolovertheinternaloperationsofafinance institution,movingforward,alignmentofstrategicdirectionwillbemorecloselyreviewedandtargetedtrainingwillbeprovidedtoensurepotentialfor long-term sustainability.

2.5. Gender and Energy

Overall, the regulatory framework in Ghana promotes gender equality, which isenshrined in the country’s 1992 Fourth Republic Constitution prohibiting gender-based discrimination (Act 17-3). In addition to ratifying key major treaties relatedtowomen’s rights (suchas the1986Convention for theEliminationofall FormsofDiscrimination AgainstWomen), theGovernment ofGhana has ledmany initiativespromotinggenderequality,includingtheAffirmativeActionGuidelinesthatencouragesa 40% representation of women at all levels of governance and administrativeleadershippositions.TheMinistryofWomenandChildren (MOWAC),established in2001,isresponsibleforpromotingthedevelopmentandwelfareofwomen.In2012,theMOWACadoptedandlaunchedtheNationalPlanofActionforWomen,PeaceandSecurity,designedtoensurethattherights,interestsandspecialneedsofwomenandgirls are integrated in policy formulation and implementation.

Whiletheentirepopulationisaffectedbythecountry’senergychallenges,womenareparticularlyimpactedduetotheirregularcontactwith,andhouseholdmanagementof,energy,particularly,renewableenergysources.Forexample,statisticsshowthatmanyhouseholdsintheruralareasrelyonbiomass,primarilywoodfuelsandcharcoal,forcooking.Womenandchildrenaremostaffectedbytheuseoftheseenergysourcesas they are the ones burdened with the collection of wood fuels and charcoal and exposedtotheassociatedhazards.Inspiteoftheirrelevancetothefuturedirectionofthesectorhowever,thereisincreasingconcernthatfemaleparticipationislowinpolicydecisionmaking.

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Inthiscontext,theGovernment’spolicyobjective–assetbytheGSGDAII-istoensurethattheenergysectorisgendersensitivethroughmainstreaminggenderconcernsintothesectorandaligningthemwithproperhealth,safetyandenvironmentalstandards.Thisisexpectedtobeachievedthroughtheimplementationofthefollowingstrategieswhich support capacity development of women in the energy sector: promotingincreased access to modern forms of energy by women in order to reduce the tedium intheiractivities;securingparticipationofwomenintheformulationandimplementingenergysector interventions;andensuring thatconcernsofwomenandchildrenaretakenintoaccountineveryaspectofenergyproductionanddistribution.

3. NATIONAL ENERGY POLICY AND INSTITUTIONAL FRAMEWORK

3.1. Energy Policy & Strategic Framework

TheaforementionedGhanaSharedGrowthandDevelopmentAgenda(GSGDAII)for2014-2017isthemediumtermnationalpolicyframeworkforthecountryandbuildsonthelessonslearntfromtheperformanceofthepreviousGSGDAfor2010-2013.TheGSGDAIIidentifiespowerasthemajorbindingconstrainttotheacceleratedeconomicgrowth and development of the economy. The loss in GDP growth, as a result ofinsufficientandunreliablepowersupply,isestimatedtoreach5.6%by2017.TheGSGDAIIhighlightsthat:“In the medium-term, Government policy will focus on increasing the proportion of renewable and other sources of energy in the supply mix, particularly solar, wind, mini- hydro and waste-to energy. The strategies to be implemented will include: accelerating the implementation of the 87 provisions of the Renewable Energy Act 2011, Act 832; providing access to waste-to-energy technologies; and facilitating access to the grid for stand-alone renewable energy power plants.”

ThedevelopmentandmanagementofGhana’senergysector isguidedbythe2010NationalEnergyPolicy.TheEnergySectorStrategyandDevelopmentPlan(February2010)setsavisionforthesector,whichistoguaranteetheavailabilityofanadequatelevel of energy supply meet the country’s internal demands and ensure universalaccess tomodern energyby 2020 (recentlymoved forward to 2016by the currentadministration) as well as provide surplus energy for export. To realize that vision,Ghanawillneedtoovercomethekeychallenges in thesectorby:

1. Developing infrastructure for theproductionand supplyof adequateenergyservices tomeetnational requirementand forexport;

2. Expandingtherequisiteinfrastructuretoensureuniversalaccessaswellastheefficientandreliablesupplyofenergyservices;

3. Ensuringenergyisproducedandsuppliedinaformthathasnoadversehealth,safetyandenvironmentalimpact;and

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4. Guaranteeingtheefficientproduction,transportationanduseofenergy.

Renewable energy development can contribute to overcoming the aforementionedchallenges.Infact,theNationalEnergyPolicystatesthat“thegoaloftherenewablesub-sectoristoincreasetheproportionofrenewableenergy,particularlysolar,wind,minihydroandwaste-to-energy inthenationalenergysupplymixandtocontributeto themitigation of climate change.” The Energy Sector Strategy furthermentionsthat for the wind, solar and mini-hydro technologies, the GoG will focus on: (i)promoting theexploitationanduseofminihydro,solarandwindenergy resources;(ii) supporting indigenous researchanddevelopment aimedat reducing the cost ofrenewableenergytechnologies;(iii)providingtaxincentivesforallequipmentimportedfor the development of renewable energy projects; and (iv) supporting the use ofdecentralized off-grid alternative technologies (such as solar PV and wind) wherethey are competitive. Indeed, increasedusageofRE is likely to lead to substantialadditionalenergysupplyinfrastructurethatcanmeetnationalenergyrequirements,aswellas increasethecountry’s levelofaccesstomodernenergy.Renewablesare, inmostcases,alsoenvironmentallybenignwithvirtuallynoadversehealthimpactsonconsumers.

TheGovernment ofGhana is keen tomeet the Sustainable Energy for All initiative(SE4All)objectivesby2020.Itiscurrentlywellpositionedtodosoasthecountryhasmadeimpressivegainsinexpandingelectricityaccessacrossthecountrywhichhasresulted in the Government’s revision to the timeline for the universal access goaldownto2016.Ghana isalsodeveloping itsSE4AllNationalActionAgenda(SE4All-AA)andinvestmentprospectustoincreaseitsrenewableenergycapacityandextendreliableenergyaccesstoallofitscitizens.Inthiscontext,theSREPInvestmentPlanisconsideredoneof the implementationtoolsof theSE4All investmentprospectus,partofwhich focusesonRE-poweredmini-gridsandstand-aloneSPVs foroff-gridcommunities.

3.2. Institutional Framework

Thefollowinggraphic(Figure3)providesanillustrationofthekeyplayersinGhana’senergysector:

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Figure 3. Key Players in the Energy Sector22

Ministry of Power

Generation & Transmission Directorate

Distribution Directorate Renewable & Alternative Energy Directorate

Public Utilities Regulatory Commission

Energy CommissionEnvironmental

Protection Agency

Independent Power Producers

Imports Bui Power Authority Volta River Authority

Ghana Grid Company

Export Enclave Power Company Electricity Company of Ghana

Northern Electricity Distribution Company

Bulk Customers Residential, Commercial, Industrial

3.2.1. National Institutions

Ministry of Power: TheMinistryofPower (MoP)oversees theenergysector,and isresponsibleforenergypolicyformulationandimplementation.Therearethreemainlinetechnicaldirectorates: theGenerationandTransmissionDirectorate, theDistributionDirectorate, and the Renewable and Alternative Energy Directorate (RAED). In linewith provisions of theRenewable Energy Act 832, theMoP established theRAED,whichhas the legalmandate tocoordinatealleffortsandmanage thedevelopmentandpromotionofrenewableenergiesinGhana.Morespecifically,theRAEDoverseestheimplementationofREinitiatives;executesREprogramsandprojectsinitiatedbytheState,or inwhich theStatehasan interest;andfinally,manages theREsectorassets on behalf of the State until such a time when the Renewable Energy Authority is established.TheMoPhaseighttechnicalagenciesordepartments.

Energy Commission (EC): The Energy Commission is the technical regulator of Ghana’selectricity,naturalgasand renewableenergy industries,and theadvisor toGovernment on energy matters.

Public Utility Regulatory Commission (PURC): The Public Utilities Regulatory Commissionwas set up as amulti-sectoral regulator by theGovernment ofGhana22 Ministry of Power.

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inOctober1997aspartoftheutilitysectorreformprocesstoregulatetheprovisionofutilityservices intheelectricityandwatersectors.ThePURCalsohasregulatoryresponsibilityovercharges forsupply, transportationanddistributionofnaturalgasservices.ThePURCisresponsibleforsettingandapprovingrateschargeableforthepurchaseofelectricityfromconventionalandrenewableenergysourcesincludingmin-grids.

Environmental Protection Agency (EPA): The EPA is the leading public body forprotecting and improving the environment inGhana. It is responsible for regulatingthe environment and ensuring the implementation of Government policies on theenvironment.

Electricity Generation & Transmission:Thebulkofthegenerationassetsareownedbystate-ownedutilitycompaniesandIndependentPowerProducers(IPPs).TheVoltaRiverAuthority (VRA)andBuiPowerAuthority (BPA)are themainpublicgenerationcompaniesthatoperateGhana’shydropowerplantsandsomethermalpowerplants.AnumberofIPPshavebeenlicensedtobuild,ownandoperatepowerplants.TheGhanaGridCompany(GRIDCo)ownsandoperatesthetransmissionnetwork.

Distribution Utilities: Thedistributionutilitiesare theElectricityCompanyofGhanaresponsiblefordistributionserviceswithinthesouthernzone,EnclavePowerCompanyfortheFreeEconomicZoneandtheNorthernElectricityDistributionCompany(NEDCo)responsiblefordistributionservicesinthenorthernbelt.

3.2.2. Development Partners’ Support and Coordination

Ghanahasreceivedsignificantenergy-sectorsupportfromitsdevelopmentpartners,whoseharmonizedassistanceisalignedwithnationalprioritiesandstrategies.Ghanahasawell-coordinatedworkinggroupofDevelopmentPartners(DPs)involvedintheenergy sector which is currently being co-chaired by the AfDB on the DPs side and the chiefdirectorsoftheministriesofpetroleumandpowerontheGoGside.Theenergysector working group comprises many DPs assisting the country through variousfinancinginstrumentssuchas:theAfDB,theWorldBankGroup(WBG),theEuropeanUnion(EU),theUnitedNationsDevelopmentProgram(UNDP),theAgenceFrançaisede Développement (AFD), the Kreditanstalt fürWiederaufbau (KfW), theMillenniumChallengeCorporation(MCC)andtheStateSecretariatforEconomicAffairs(SECO).Thegroupmeets regularly todiscuss key sector issues and challenges, aswell asdevelopmentpartners’approachesandinterventionstoaddressthem.

Aspreviouslymentioned,GhanaisaparticipantintheSustainableEnergyforAll(SE4All)initiative.Theinitiative,launchedinSeptember2011bytheUnitedNationsSecretary-General,aimsto:(a)achieveuniversalaccesstoenergyservicesinparticularelectricityservices and clean cooking solutions; (b) double the global rate of improvement inenergyefficiency;and(c)doubletheshareofrenewableenergyintheglobalenergymixby2030.TheSE4AllInvestmentProspectusforGhanaiscurrentlybeingpreparedandadraftversionshouldbeavailablebytheendofthesecondquarterof2015.

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The AfDB, SECO and theWB are supporting the Ghana Energy Development andAccessProject(GEDAP)inwhichonecomponentpromotesamixofRE-basedmodelsincluding four pilot mini-grids to serve nearly 10,000 people in selected deprivedcommunities.Buildingon thesuccessof theGEDAPmini-grid initiative, theGoG isenvisagingscaling it up.

KfW is working with the VRA to develop a 12MW solar PV project. The VRAwillownandmanagethesolarplant,whichisexpectedtobeconstructedinearly2016.KfWiskeentocontinueinvestingintheREsectorinthecomingyearsastheirnewprogramming cycle starts in 2017.

GIZ’sworkonREfocusesontechnicalassistancefortheimplementationoftheREActand implementationofproductiveuseofenergy foron-gridandoff-gridoperations,aswellasfinancingforsmall-scaleprojectswithsuccessful results-based-evidenceschemes,suchas:

• Productiveuseofenergyinagriculture:gridelectrificationandsolarPVpumpingforirrigation,andproductiveuseofelectricityin18lightindustrialzonesinfiveregions(EnDev):

• Improvedcookingstovesforgari(processedcassava)processinginpartnershipwiththeDutchNGOSNV(EnDev);and

• AdvisoryservicesoncapacityforsuccessfulimplementationoftheREActonREscenariosincludingapreliminarygridimpactstudy,theFITschemeincludingtariffs, purchase obligations and connection, net metering, standardizedRE PPAs, pilot tenders for variable RE, credit support and technical andorganizational development training (Ghanaian-German cooperation).

Managed by GIZ, the EnerGIZing Development Program (EnDev) is supporting arangeofpilotsmall-scalerenewableenergyactivitiespromotingaccesstoenergyandproductiveuseofenergy. It is fundedby:

• DutchMinistryofForeignAffairs(MFANL),

• GermanFederalMinistryforEconomicCooperationandDevelopment(BMZ),

• NorwegianMinistryofForeignAffairs(MFANO),

• AustralianAgencyforInternationalDevelopment(AusAID),

• UKDepartmentforInternationalDevelopment(DFID),and

• SwissAgencyforDevelopmentandCooperation(SDC).InfoDev, a global multi-donor program intheWorld Bank Group, supports growth-orientedentrepreneursthroughcreativeandpath-breakingventureenablers.InfoDevis supporting the establishment of a climate innovation centre (CIC), with supportfromtheDanishMinistryofForeignAffairsandledbytheAsheshiUniversityCollegeinGhana.CICs are designed to provide climate technology entrepreneurswith thementorship, financing,networks, andbusinessservices theyneed toscale-up theirinnovations,drivingdowncarbonemissionsandcreatingsustainable,inclusivejobs.

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3.2.3. Role of Private Sector and Non-Governmental Organizations in Developing RE

Ghana’sopeneconomyandfreedemocraticspacehascreatedanenablingenvironmentforthegrowthofadynamicprivatesectorandcivilsocietycommunity.

In1994,theGovernmentofGhana(GoG)launchedthePowerSectorReforms(PSR)to catalyze the rapid expansion of infrastructure in line with its socio-economicdevelopmentagenda.ThePSRthussoughttoenhancetransparencyintheregulationofthesectorandtoopenuptheindustrytoprivatesectorparticipationbydismantlingthe vertically integratedutility structure andavailing thegenerationanddistributionaspectsoftheindustrytomarketcompetition.Theimplementationofthereformprocesshas resulted in the current unbundled structurewith separateoperational functionsin respect of powergeneration for theVoltaRiverAuthority (VRA), transmission fortheGhanaGridCompany (GRIDCo) anddistribution for theElectricityCompanyofGhana(ECG).AsaresultofthePSR,thesectorhas,since1997,beenregulatedbytheEnergyCommission(EC)whichisthetechnicalregulatorresponsibleforlicensingandadvisingtheMinistryofEnergyonpolicyissues;andthePublicUtilityRegulatoryCommission (PURC) which is the independent economic regulator responsible forapproving and setting tariffs. The reformed structure is expected to encourage theparticipationofIndependentPowerProducers(IPP)inacompetitivegenerationmarketaswellasbi-lateralcontractswithbulkcustomersinaderegulatedmarket.Asaresultofthereform,there isnowsubstantialprivatesectorparticipation inthesectorwitha growing portfolio of private sector driven IPPs. The growing renewable energysector has attracted awide range of private sector players, ranging from solar PVdistributorsandassociatedinvestorstoagro-industriesthatusebiomassby-productsforprocess-heatgeneration.Recentprivatesectorentrants includeabuddingsolarPVassemblerandanumberofpotentialwind-farmdevelopersanddedicatedenergyplantationdevelopers.ThevastpotentialofprivateinvestmentandengagementinREinGhanacanbefurthercatalyzedbySREPactivitiesandinvestments inthesector.Inthebiomasssector,theprivatesectorhastraditionallybeenactivemainlythroughinformalsectorenterprisesandentrepreneursinvolvedinkeystagesofbiomassenergytransformationanddistribution,aswellasbiofuelstovemanufactureandsales.

The Netherlands Development Organization (SNV)is an internationalnot-for-profitdevelopmentorganization. InGhana,SNVcontributestopovertyreductionwiththeimplementationofseveralrenewableenergyprojects including:activitiesontheroleofgender inagro-processing, improvedcook-stoves/fish-smokingandsmall-scaleenergy enterprises.

Kumasi Instituteof Technology,Energy andEnvironment (KITE) is aGhanaianNGOand a leading actor in the Energy, Technology and Environment sectors in GhanaandtheWestAfricaSub-Region.Sinceitsinceptionin1996,KITEhasbuiltauniquecapacityinthedevelopmentandimplementationofpublicbenefitprojects.KITEistheproductofextensivecapacitythathasbeenbuiltthroughabroadrangeofprojectandprogramexperiences,partnershipswithkeynationalandinternationalactorsandthe

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developmentofefficientinternalmanagement,governanceandreportingcapabilities.KITE developed the Energy for Poverty Reduction Action Plan for Ghana (EPRAP)andthebusinessdevelopmentservicespackageforAfricanRuralEnergyEnterpriseDevelopment(AREED)topromoteprivatepartnershipsinthecleanenergysector.

SNVandKITEarealreadyactivepartners in theMoP’s renewableenergy initiativessuchasthemulti-donorGEDAPproject.

NewEnergyis a non-governmental organizationlocated in Tamale in the NorthernRegionofGhana.Foundedin1994,NewEnergy’smainareasofactivitiesarerenewableenergyservices,environmentalconservation,enterprisedevelopmenttraining,micro-creditsupport,waterandsanitationservicesaswellaspolicyadvocacy.

3.2.4. Role of Financial Sector in Financing RE

Ghana’sfinancialsectorisvibrantandcompetitive,buthasnotyetengagedinfinancingRE. Infact,macroeconomicfactorssuchas inflation,high interestratesandforeignexchange volatility largely hinder local banks’ ability to provide long-term financingbeyond3-5years.ProjectfinancingisalsostillanascentproductinGhana’sfinancialsector.Privatedevelopersreportbankratequotesintherangeof27-32%for5yearcorporateloans.Thus,thereisawidegapbetweenavailablelocalfinancingoptionsand the specific financing demands of RE projects (non-recourse financing, longertenors,lowerrates).

Asaresult,intheshort-term,GhanamustrelyoninternationalfinancingformostofitsREdevelopment.GiventhenascentstageoftheREsector’sdevelopment,itcanbereasonablyexpectedthatthemarketisperceivedasrelativelyriskybyinternationalcommercial banks and project financiers. Lenders will therefore need the supportof international finance institutions toparticipate in the firstREprojects.Reputableinternationaldevelopersandequityinvestors,whilstdemonstratingsignificantinterestin the development of RE in Ghana, are also cautious partly because of the stilluntested regulatory framework forREandunknownabilityofREprojects toattractdebtfinancing.Thistranslatesintodeveloperexpectationsofrelativelyhighreturnstocompensate for thehighperceivedmarketandfinancingrisk.

3.2.5. Stakeholders’ Consultations and Feedback on Renewable Energy

TheMinistryofPoweremployedabroad-sector stakeholder consultationapproachin thepreparationof theSREP IP. Theprocess includeda scopingmission, a jointmission,one-on-onemeetings,circulationofthedraftIPtorelevantstakeholders,andpublic disclosure on theMoP’s website.23 Through this process, theMoP obtainedmanyinvaluablesuggestionsandcommentsregardingtheprioritiestobeaddressed,typesofactivitiestobeundertaken,andpolicyandregulatorydirectivestobefollowed.

TheMoP invitedexperts fromtheECOWASCentre forRenewableEnergy&EnergyEfficiency(ECREE)toathree-dayretreatworkshopoftheSREPNationalTaskForceat23GhanaMinistryofPower.http://www.energymin.gov.gh/Power/?page_id=37.

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SenchiintheEasternregionofGhanatodiscussandsolicittheirinputs.ThiswastoensurethattheSREPGhanaIPwasnotonlyalignedwiththenationalpolicyobjectives,butmorebroadlywiththeECOWASRenewableEnergyPolicy(EREP)aswell.

Thefeedbackreceivedduringtheconsultationprovidedclarityontherenewableenergystrategyandtheroleoftheprivatesectorwithintheregionalcontext.Italsounderlinedtheneedtostreamlinetheprocessesforrenewableenergyprojectdevelopment,clarifycurrent renewableenergy feed-in tariffs,andensuremoreeffectiveandexpeditiousimplementation of the existing regulatory framework. It also stressed the need toimproveaccesstoandcoverageofrenewableenergyresourcedataandfinanceonaffordableterms.

ThekeydevelopmentpartnersconsultedviewtheSREPasanopportunityforGhanatoaccelerateREdevelopmentbecauseitiscloselyalignedtotheirinterventionsinthecountryandprovidesanopportunitytocrowd-inadditionalresourcesforscale-upofREinvestments.

StakeholdersalsoacknowledgedtheneedtostrengthencurrentinstitutionalcapacitiesinordertohandletheincreasedworkloadexpectedduringtheSREPimplementation,which can only succeed if a broad group of stakeholders is effectively engaged.Finally,theynotedthevitalneedforknowledgegenerationandlessonsharingamongstakeholdergroupsinorderforsustainable,transformativechangestooccur(Annex3).

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RENEWABLE ENERGY SECTOR CONTEXT

1. RENEWABLE ENERGY POTENTIAL AND DEVELOP-MENT STATUSGhana isendowedwith renewableenergy resources.Theproven renewableenergyresourcescurrentlybeingdevelopedarebiomass,solar,wind,waste-to-energy,smallandmedium hydropower and tidal wave energy. To date, only aminiscule portionof the renewable energypotential hasbeen exploited. Excluding large hydropower,modernrenewableenergysystemscontributealittleabove0.3%tothecountry’stotalinstalledcapacity (seeTable1).Thedevelopmentofrenewables isconstrainedbyanumberofchallenges,notably:

• Highupfrontcapitalcost

• Inadequate,unaffordableandunsustainablefinancingsolutions

• Challengingandrelativelynewregulatoryandlegalframeworks

• Limitedcapacitytooperate,maintainandmanagerenewables

• TheftandhighreplacementcostofmajorcomponentsTheMoP iscommitted to thesustainabledevelopmentandutilizationof renewableenergies to address energy access issues, contribute to the fight against climatechange, resolve environmental problems, and create sustainable green jobs forGhanaians.ThegoalsetbytheNationalEnergyPolicyistoreach10%contributionofrenewableenergy(excludinglargehydrowhichhasaninstalledcapacityofmorethan100MW) in theelectricitygenerationmixby2020.

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1.1. Hydropower

There are about 17 medium and 22 mini/small hydropower sites with exploitablecapacitiesrangingfrom15kWto100MWwhichmeetthedefinitionofrenewableenergyresourcesundertheRenewableEnergyAct2011,Act832.Theestimatedexploitablecapacityofthesesitesis800MW.Themainbarrierspreventingthedevelopmentofthisresourcehavebeenclimatevariabilityandtheunavailabilityofthedataneededtoassesstheviabilityofthesites.

Recently, theGoG launched a number of initiatives to assess the viability of thesehydropower sites:

• TheSwissGovernmentthroughSECOisfundingaHydropowerSustainabilityAssessmentProject (HSAP)onsixhydropowersiteson theblackandwhiteVoltaRivers.ThesesitesareLanka,Ntereso,Koulbi,Daboya,Kalpawn,andJambitowithaggregatedexploitablecapacityof362MW.Theresultsof theassessmentareexpected inMay2015,however thesizeof thehydropowerplantsbeingconsideredareabove the10MWcapacity threshold forSREPconsideration.

• The Agence Française de Developpement (AFD), theWorld Bank (WB) andtheVoltaRiverAuthority(VRA)arejointlyfundingvariousaspectsofongoingfeasibility studies on the Pwalugu (40MW) and Juale (90MW) hydropowersites.

• China Water Electric (CWE) and Bui Power Authority have funded the fullfeasibility study of Hemang (60 MW) hydropower project.

• The AfDB and the MoP/GEDAP are in the process of commissioning pre-feasibilitystudieson10additionalsmallandmediumhydropowersiteswithaggregated exploitable capacity of 248MW.

TheMoPisaggressivelystudyingtheviabilityofthesesitesforpotentialdevelopmentinordertoincreasetheshareofrenewableenergyinthemix,improvetherobustnessofthetransmissionnetworkandallowfortheintegrationofsmallerhydro-powerprojects.UnderSREP,mini-hydroelectricityisconsideredtobebelow10MW(versus100MWforthecaseoftheGoG).Asperavailabledata,themini-hydrocapacitybelow10MWinGhanaisverysmall.Mosthydrocapacityisactuallyabove10MW,thereforenotaviableoptionundertheSREPframework.

1.2. Solar

ThesolarirradiationlevelinGhanarangesfrom4.5to6.0kWh/m2/daywiththehighestirradiationlevelsoccurringinthenorthernhalfofthecountry.Bytheendof2014,atotalof38,200solarsystemsand lanternsweredeployed inmorethan120communitiesthroughoutthecountryforoff-gridapplications.Twenty-fivegrid-tiedinstallationswithtotal installedcapacity (includingstand-alones)of8MWwereoperationalasofend

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2014.Interest inutility-scalesolarPVisveryhighbutsofaronlya20MWsolarPVproject isunderconstruction.Nevertheless,morethan30utility-scalesolarprojectsfor a total generation capacity in excess of 1.8GWhavebeen issued at least oneprovisionallicensebytheEnergyCommission.

Themainbarrierspreventingtherapiddevelopmentofthisresourcearethehighinitialinvestmentcostsasopposedtoconventional(non-renewable)energysources,limitedexperience and track record of utility-scale solar development, high perceived riskby private developers of a largely untested new FiT regime, and limited access toaffordable financing.

TheGovernmentispilotinganumberofinitiativestoimprovethelearningcurvesforscaling-uprenewableenergy.For instance:

• TheEnergyCommissionhasissuedSitingClearancePermitstofifteenIPPsforutility-scalesolarprojects.However,onlyoneutility-scalesolarPVproject(20MWp)isunderconstructiontodate.

• TheMoP and Energy Commission are developing a new private sector ledframeworktopromotetheinstallationofabout200,000solarhomesystems.

• TheSolarLanternsPromotionProgram (SLAP) isworking toward itsgoalofdistributing 2 million high quality solar lanterns in deprived remote/off-gridcommunitiesby2020throughvarioussubsidyschemes.SincethelaunchoftheSLAPin2013,atotalof80,000havebeenprocuredthroughtheGoGbudgetandover50,000havebeensoldata70%subsidytotargetbeneficiaries.Fundsthatoncemadeupthekerosenesubsidywereusedforthisprogram.

• A715kWpsolarPVnet-meteredinstallationattheNoguchiMemorialInstituteforMedicalResearchoftheUniversityofGhanawithfundingsupportfromtheJapaneseGovernment.

• Anadditional25grid-tiedPVwereinstalledattheendof2014throughprivatesectorinitiativesbringingtotalnationalcapacityto8MW.

• ThelaunchoftheGhanaRenewableEnergyFairtopromotetherapidutilizationofrenewableenergyresourcesinthecountry,especiallythroughnetmeteringwasamongthekeypublicityinitiativestomaketheindustryvisible.

• AnetmeteringcodewasdevelopedwithtechnicalassistancefromtheGermanGovernment.

1.3. Wind

Ghanahasmoderatewindenergypotential.Averageannualwindspeedsalong thecoastandsomeislandsrangefrom4.0m/sto6.0m/sat50mhubheight.Thispotentialis proven and could support utility-scale wind power and hybrid micro/mini-griddevelopment.Similartosolar, themainbarrierstothedevelopmentofthisresourceandinvolvementbytheprivatesectorarelackofcredibledata,highinitialinvestment

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costsasopposedtoconventional(non-renewable)energysources,limitedexperienceand lack of track record of wind projects, high perceived risk of a new regulatoryregime,and limitedaccess to long-termcost-effectiveprojectfinancing.

Inordertoaddresssomeoftheseissues,theMoP,withsupportfromtheWB,hasbeenconductinganumberofwindresourceassessmentstoprovidecredibledataforearlystage planning. The private sector has complemented this initiative by conductingdetailed feasibility studies on potential wind project development. The followinginitiativesshowtheeffortstodevelopthecountry’swindenergyresource:

• WB/MoP/GEDAPhavebeenconductingwindresourceassessments(WRA)at60mabovegroundinmorethaneightsitessince2012.TheaimistoobtainbankablewinddataforplanningandsupportwindIPPs.

• TheVoltaRiverAuthority (VRA)plans to install up to 150MWofwind farmby2020andcommencedaWRAin2013at80mabovegroundateightsitesacross the country.

• TheSwisscompanyNEK/UpwindLtd.hasalreadysecuredaprovisionallicenseforanaggregate250MWwindfarmparkandisconductingdetailedfeasibilitystudies for the same.

• EleQtra/InfraCohasacquiredasiteand isconductingWRAtodevelopa30MWto50MWwindfarmby2020.

TheresultsoftheWRAcommissionedbytheMoP/GEDAPfortheeightsitesareshownin theFigure4below.These resultsconfirm that,withmoderatelyhighwindspeed(from6.0m/satAnlogato4.5m/sinGomoaFete),thereispotentialforcommercialwindfarmdevelopmentintheseareas.

Figure 4. AverageMonthlyWindSpeedat8Sites24

Todate,fourprovisional licensesandonesitingclearancepermithavebeenissued.Although therehasbeenstrong interest fromtheprivatesector in investing inwind

24GEDAPWindResourceAssessmentReport,EnergyCommission,2014.

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inGhana,delaysandlackofclarity intheapprovalprocessesmaypotentiallyderailprogress.Todate,noutility-scalewindproject isunderconstruction.

1.4. Biomass and Waste-to-Energy

Nearly50%ofthecountry’soverallprimaryenergyuseisobtainedfrombiomass.Thisenergy is consumed mostly in the household sector in the form of charcoal or wood. ThecharcoalproductionprocessisinefficientandislargelyaninformalactivityandamajorcontributortoGhana’sdeforestationproblem.Theproductionofcharcoalstovesisalsoaninformalsectoractivitywiththeexceptionofimprovedcook-stovesthatarepromotedbyNGOsandvariousdevelopmentprojects.

Industryandservice/commercialsectorsalsousebiomassenergy.Biomassresourcesincludesupply fromagricultural residues frommaize, sorghum, riceand fromagro-based industries suchas sheabutter, cocoa, rubber, sawmills, andpalmoil. In theagricultureandwoodprocessingsectors,wasteisnormallyburntasaformofdisposal,denying the country the huge untapped potential for productive power and energygeneration.

ArecentWorldBank-fundedstudy,“Agro-ProcessingandSawmillWastesAssessmentforElectricityGeneration2014”revealedthattherearenumerousclusteredagroandwood processing sites in Ghana generating a large amount of waste. The EPA, incollaborationwiththeGhanaCocoaBoard,isundertakingdetailedstudiesoncocoawaste for power generation. A local biomass energy developer has now acquiredenvironmentalandsiteclearancepermitstodevelopa6MWbiomasspowerproject.

Municipalitiesalsogenerate largequantitiesof liquidandsolidwaste.Forexample,Kumasianditssuburbsgenerateupto1,600tonnesdailywhileAccraanditsenvironsgenerateupto2,500tonnes.Additionally,Accrageneratesover800m3 of liquid waste permonth. This could be a good feedstock for biogasproduction for cooking andelectricity generation.

Themain barriers hindering the development of this resource are the high start-upcosts, limited local expertise in utility-scale biomass power production, feedstockcompositionandsupplyrisks.Thefeedstockcouldcomefromagriculture,householdandindustrialwaste.However,inmostcases,thewastehaslimitedsupplypotentialforutility-scaleenergygeneration,andhence,productionofspecificcrops(orwood)mightbenecessary.Insuchcase,theenvironmentalandsocialimpactsaretremendousand food security could be negatively impacted. Furthermore, the preservation oftropicalforestshashighestpriorityamongmeasurestomitigateclimatechange(andto safeguardbiodiversity).

1.5. Wave & Tidal Energy

Tidal energy is produced using tidal energy converters. These huge underwater

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turbinesareplacedinareaswithhightidalmovementsandaredesignedtocapturethekineticmotionoftherecedingandrollingoceantidestoproduceelectricity.Tidalpowerhasabundantpotentialforfuturepowerandelectricitygenerationbecauseofthe enormous size of the oceans.Ocean waves contain significant energy densityand have substantial commercial potential if the energy can be extracted using areliable,environmentallyfriendlyandcost-effectivetechnology.Waveenergy,whichisarenewable,sustainableandafreesourceofenergy,wouldhavesignificantimpactonelectricityproductionintheworldiffeasiblesolutionsintermsoftechnology,economyandecologywereprovided.

AlocalGhanaiancompany,TCEnergy,incollaborationwithSwedeEnergy,isintheprocessofinstallingapilot14.5MWTidalWavePowerPlantattheconfluenceoftheVoltaRiverandtheGulfofGuinea,AdaFoah.Thiscompanywillutilizeseabasedwaveenergyconvertersforthegenerationofpower.ThecompanyhassignedaPPAwithECGfor1,000MWatatariffofaround9centsperkWh.Althoughthetechnologyhastheadvantageofbeingscalable,itisrelativelynewwithlimitednumberofcommerciallyprovenplants.

2. LEGAL AND REGULATORY FRAMEWORK FOR RE-NEWABLESGhana’senergystrategysetagoalforrenewableenergytoconstitute10%ofthenationalenergygenerationby2020.Toreachthatgoal,ParliamentpassedtheaforementionedRenewableEnergyAct2011,Act832,providing the legalandregulatory frameworknecessaryfordevelopingandexpandingthecountry’sREsector.

TheRenewableEnergyAct2011,Act832callsfor:

• AframeworkfortheutilizationofREenergysources,

• AnenablingenvironmenttoattractinvestmentsinREsources,

• ThebuildingofindigenouscapacityintechnologiesfordevelopingREsources,

• PubliceducationonREproductionandutilization,and

• Regulationoftheproductionandsupplyofwoodfuelandbio-fuel.There are additional regulatory and policy instruments in place that promote REdevelopment in Ghana, notably:

• ANationalElectricityGridCode(2009)forrenewableenergy,

• Renewableenergyfeed-intariffs,

• Guidelines for a renewable energy purchase obligation (under which powerdistribution utilities and bulk electricity consumers are obliged to purchasea certain%age of their energy required from electricity generated from REsources),

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• AREPowerPurchaseAgreementdrafttemplate,

• A 2014 Bioenergy and Policy Strategywhich calls formodernization of thesupply and use of bioenergy on a sustainable basis,

• AframeworkfortheestablishmentoftheRenewableEnergyFund(REF)withEuropean Union support to provide long-term financing for the promotion,development, sustainable management and utilization of RE resources,especiallytheextensionofelectrificationaccesstoremoteoff-gridcommunitiesusingRE technologies, and

• AnimporttaxexemptionforsolarPVsystem.

In2012,theGoGintroducedaninnovativeapproachofredirectingexistingkerosenesubsidies forsolar lightingoptions.The rational for thenewGoGpolicywasbasedonthelogicthatbothkeroseneandsolarlightingwouldhelpmeettheend-userneedforlighting.TheGoGhasalsosuccessfullyimplementedoff-gridcommunitylightingprojectsdrivenbyPV-powerenergycentresthatgeneratesufficientrevenuethroughmobilephonechargingtosupportoperationsandmaintenanceofsolarstreetlightsfor streets, social centres andmarkets in these communities. And, in communitiestargetedbytheproject,therehasbeenanadditionalbenefitof improvedsecurity inremoteareaswherebyoutdoorlightingishelpingprotectagainstfemaleharassmentastheynolongermustreturnfromtheirdailyactivitiesunderthedarkofnight.

TheMoPisworkingwiththePURCandtheEnergyCommissiontodeveloptheregulatoryframeworktoaddressthechallengesofmini(andmicro)gridsandoff-gridstand-aloneelectrificationinterventions.Procurementofexpert(s)todeveloptheframeworkisinanadvancedstage.TheWorldBank,throughtheAfricanElectrificationInitiative(AEI),willbeprovidingexperttechnicalreviewofthedraftregulations.Thiswouldpavethewayforthedevelopmentoftherelevanttariffmechanismandimprovethebusinessmodelformini-gridsthatisbeingconsideredunderthemini-gridcomponentofthisprogram.

InordertoprovideacriticalmassofREinstallationsthatwouldlaythegroundworkforscale-up, theMoPhassetambitiousrenewablestargets listed inTable4below.However, the regulatory framework for RE in Ghana remains relatively uncertainand untested. For instance, the newRE-FiT (indicated in Table 3) are offered for amaximumof10years,whichisconsideredtooshortaperiodtoattractthelong-tenorprivatefinancingnecessarytomakeutility-scaleprojectscost-effectiveandfinanciallysustainable.TheprocessesforREprojectdevelopmentisalsocumbersomewiththeimplicationofmanystakeholders intheabsenceofastreamlinedapproachsuchastheestablishmentofaone-stopshop.

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table 4. MoPRenewablesTargetsby202025

Potential RE Projects Target Required Investment USD million

Development of utility type wind farms

50-150MW 300-550

Development of grid-connected solar parks

MW 400-700

Solar lantern promotion 2millionunits 150-200Medium – small hydro 150-300MW 450-900Modern biomass /waste to energy

20-50MW 60-150

Development of mini-grid 30-42units 21-38.5Off-grid RE project 30,000units 10-25Sustainable energy for cooking 2.0millionunits 10-50

totAl Investments USD1.4-2.6billion

3. BARRIERS TO RENEWABLE ENERGY DEVELOPMENT AND MITIGATION MEASURES Themainbarriershinderingthescaling-upofRE-basedelectrification inGhanaandhampering the achievement of the MoP renewables targets discussed above arepresentedinTable5below.Theresponsemeasurestakentodatearealsodiscussed.

table 5. BarriersandMeasuresTaken

Barrier Measures taken to date technical/Skillslimited capacity of the utilities, regulators and financial institutions and project developers to structure and negotiate bankable PPAs

- Bilateral arrangements with the Governments of China, Japanand India, aswell asthe EU, to provide technical assistance tobuild short- and long-term capacities for utilities.-CurrentstockofskilledREpersonnelstillinsufficient.

limited capacity in appropriate selection of re technology options and inefficient operation and main tenanceof complex re technology machinery and equipment

-MoP supporting Ghana Standards Authority and The EnergyCentre (TEC) of Kwame Nkrumah University of Science andTechnology (KNUST) to develop capacities for testing RETs.-MoP and the Chinese Government providing TA to selectedpolytechnicsand technical/vocational institutions tobuildcriticalmiddle level manpower for the industry.-GermangovernmentassistinginthedevelopmentofREcurriculafortechnicalandvocationaltrainingundertheCouncilforTechnicaland Vocational Education and Training.-NumberoftrainedREspecialistsisstillnothighenoughtomeetcurrent and future demand.

25 Ministry of Power

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Barrier Measures taken to date Insufficient RE resource data

- WithsupportofTheWorldBank,comprehensivewindandbiomassresourcesassessmentsareongoingtoreducedevelopmentrisksof utility-scale RETs.-SECOandAfDBfinancingvariousaspectsofhydrostudies.-WindandsolardataobtainablefromEnergyCommissionatverylow cost.- The data on other renewables is still inadequate nor is there sufficientsitespecificwindandsolardataforallviable locationsin Ghana.

renewables such as mini-hydro susceptible to adverse effects of climate change (e.g., drought)

-GoG actively pursuing several mitigation and adaptationmeasuresincluding the use of the International HydropowerAssociation (IHA) early stage risk assessment protocol.-Reforestationofthecatchmentareasofthecountry’smajorriversystems.

Institutional/regulatory

regulatory burden for small-scale re developers compounded by absence of a one-stop centre

-MoP and relevant regulatory institutions reviewing the option ofdevelopinglightregulationandestablishingaone-stopplatformforprocessingandapprovingapplications.

Absence of a clear criteria differentiating communities that would benefit from off-grid and grid-connected electrification

-MoP with support from The World Bank is conducting acomprehensive GIS-based study to establish and prioritize thesuitableelectrificationoptionsfortheremainingnearly20%ofthecountry’s population.-PreliminaryresultsoftheGISworkshowedthatislandandlakesidecommunitiesaremostlikelytobenefitfromREoff-gridelectrificationdue to the high cost of grid-extension.

limited structural arrangement for operation and management of off-grid re investments

-In the interim, the Renewable & Alternative Energy Directorate(RAED) is currently managing the assets.-EffortsunderwaytoestablishtheRenewableEnergyAuthoritywiththemandatetoown,operateandmanageREinvestmentsinwhichthe state has an interest.

lack of commitment to enforce approved regulatory and legal frameworks

-AAF (Automatic Adjustment Formula for RE FIT) systemimplementation ongoing.-GoGdemonstratingpoliticalwilltoensurelessornointerference.Utilitiesareinstallingprepaidmetersinallpublicfacilitiesasaresult,withtheexceptionofessentialpublicsectorssuchashospitals,etc.

FinancialPerceived investor risk related to re sector in Ghana

-TheAfDBandWBareexaminingtheoptionofprovidingPRGs(PartialRiskGuarantees)toprivateinvestorsinthepowersectortomitigatetheutilitiescreditrisk.

High up-front cost of re technologies supported by re Fits for a maximum of only 10 years

-EC developed relevant policy tools such as: RE tariff settingmethodologies,licensingproceduresandguidelines;REpurchaseobligations; and standard PPA templates, etc. These are usefultools but cannot on their ownovercome theproblemof a shortduration FiT (10 years).

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Barrier Measures taken to date

Inadequate financing and high cost of capital

-KfWhasestablishedanofficeinGhanaandisalreadyprovidingfinancingfora12MWsolarprojecttoVRA.-Ecobank and National Investment Bank are two nationalfinancing institutions planning to establishRE portfolios to fundRE development.

low end-user electricity tariffs increase FiT burden on utilities and GoG

-Upwardadjustmentofelectricitytariffstothetuneofabout90%by2013.-Implementationoftheautomaticadjustmenttariffsystemwhichshould strengthen utilities’ balance sheets and enhance their capacitytoabsorbfutureFiTpayments(currentREFiTpaymentsare still low, reflecting the limited number of grid connectedREinstallations).-RE-FITreviewedwithrevisedratesgazettedinOctober2014.

Weak balance sheets of current utilities

-OngoingGoGeffortstoenforcetechnicalandrevenueleakagesreduction mechanisms/strategies including replacement of allcredit meters with prepaidmeters.- With the exception of essential departments, all governmentfacilities to be prepaid metered.

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CONTRIBUTION TO NATIONAL ENERGY ROADMAP

SREPwillcontributetotheachievementofthe“EnergySectorStrategyandDevelopmentPlan”(February2010)byincreasingaccesstoelectricityaswellastheproportionofinstalledgenerationcapacityofREintheenergymix. Itwill furtherhelpthecountrydiversifyawayfromitsheavyrelianceonhydropowerandthermalenergies.

Themajorityoftheremainingpopulationwithoutaccesstoelectricity(about5millionbasedonthe2010GhanaStatisticalServicepopulationcensusreport)liveindeprivedrural communities including those along Lake Volta and the islands created by theAkosomboDam.Itisdifficultanduneconomicaltoelectrifythesecommunitiesthroughthenationalgrid.Thechallengesposedbytheelectrificationofthesecommunitiesarenowseenasasignificanthurdleinthecountry’sgoalofachievinguniversalaccessby2020.26

Renewable energy-based electrification options are strongly being pursued as thewayforwardforthesecommunities.Manydevelopmentpartners,includingtheAfDB,SECOandWBare supporting theGhanaEnergyDevelopment andAccessProject(GEDAP). One component of GEDAP promotes a mix of renewable energy basedmodelsincludingfourpilotmini-gridstoservenearly10,000peopleinsomeofthesedeprived communities. The Ministry of Power is leveraging resources and lessonsfromtheongoing initiativestodevelopthenecessary frameworksandscale-upandaccelerate rural electrification using renewable energy amidst resource constraints.TheSREP intervention is therefore timelyandwouldcontribute to scaling-up theseinitiatives.

26Inspiteofthis,thecurrentadministrationintendstoachievethistargetby2016,aheadoftheoriginalschedule.

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The national goal for the renewable energy sector is to achieve up to 10% of REin theoverall generationmixby2020.Thepolicy focus is therefore topromote thedevelopment and management of renewable energy resources to increase energyaccess, combat climate change and contribute to the objectives of the:

• GhanaSharedGrowthDevelopmentAgenda,

• ECOWASWhitePaperforEnergyAccess,

• UNMillenniumDevelopmentGoal,and

• SustainableEnergyForAllInitiative.

AccordingtoarecentstudyundertakenbytheMinistryofPowerwithassistancefromGIZ,27itistechnicallyandeconomicallyfeasibleforGhanatoreachthegoalof10%REgenerationby2020.Figures5,6and7showthereadoutsfromthemodeldevelopedduringthestudy.TechnicallyfeasiblemeansthatthecumulativeinstalledcapacityofvariableREtechnologieswillnotexceedthecapsetbytheGoG(maximumof150MWofsolarand300MWofwindwithoutbackupstorage)andwillthereforenotaffectthesystem’sstability.Economicallyfeasiblemeansthattheimpactofadditionalnon-leastcostRE(comparedtoconventionalpowerwhichwouldbelessexpensive)onthetariffisreasonable.Indeed,thegenerationportionoftheaverageelectricitytarifffromREwillbeonly4.2%higherthanconventionalleastcostgeneration.

Figure 5. InstalledCapacityintheLeastCostplusRenewablesScenariotoMeet2020RE Target

Source: Castalia for GIZ and the Government of Ghana (2015)

27 CastaliaStrategicAdvisors,CapacityforaSuccessfulImplementationoftheRenewableEnergyActinGhana,ResultsofPreliminaryGridAnalysisandRevisedElectricityGenerationModel,March2015.

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Figure 6. TotalGenerationintheLeastCostplusRenewablesScenariotoMeet2020RE Target

RE generation 10% of total

Source: Castalia for GIZ and the Government of Ghana (2015)

Figure 7. InstalledRECapacityintheLeastCostplusRenewablesScenario

Source: Castalia for GIZ and the Government of Ghana (2015)

However,inorderfortheseREprojectstobecomearealityandforGhanatoachieveits2020goal,significantfinancingsupportisneeded.SREPistimelyandwouldprovidepartofthefinancingtospeed-upREintegration,whileothersourcessuchastheGreenClimateFundmayalsobe tapped into toaddress the largefinancingneed. SREPwouldalsoaddressvitalareasoftheRenewableEnergyAct2011,Act832,suchastheestablishment of the Renewable Energy Authority.

Due to the shortfalls in generation, grid electricity supply continues to be erraticmakingitnearlyimpossibleforthenationtoderivethemaximumbenefitofthenationalelectrificationprogram.Ontheotherhand,pilotinstallationofnetmeteringsystems,whichprovidesincentivesfortheintegrationofrenewableenergyintothedistribution

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network through own-consumption and export of the excess energy into the gridhas not yielded the desired benefits as a result of grid unreliability. The impact onproductivity cannot be overemphasized.SREPprovides an alternative scheme thatensures uninterrupted supply of power under netmetering tomeetdesirable loadsandsustainproductivity.Furthermore,SREPsupportforafirstfinancingutility-scalegrid-connectedREprojectswillhelpdemonstratetheeffectivenessofGhana’snewREregulatoryframework,therebyattractingfurtherprivateinvestmentandmoreattractivefinancing options.

Finally,thefollowingactionsrelatedtokeypolicyissueswouldbecarriedoutbySREP:

• develop and implement tariff methodology for ancillary services (such asreactivepower,voltageandfrequencycompensations,etc.)duetorenewableenergy generation and apolicy framework and institutional arrangement formanaging renewable energy waste would improve themarket environment;and

• createthenecessaryconditionsforincreasedprivatesectorandgovernmentparticipation.

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PRIORITISATION OF STRATEGIC INVESTMENT AREAS

A consultative and participatory process involving relevant stakeholders underthe leadership of the GoG, represented by the Ministry of Power, with support oftheMultilateral DevelopmentBanks, helped in identifying and selecting the priorityrenewableenergytechnologiesforconsiderationintheSREP.Theprocesstookintoaccount preparatory work done by the SREPNational Task Force on key barriers,bottlenecks, and opportunities, as well as the conclusions of several technicalconsultations and various meetings with key stakeholders (Annex 3).

TheCIFcross-cuttingcriteria,inadditiontothenationalpolicyobjectives,wereusedtoidentifytheprioritystrategicinvestmentareasfortheSREP-GhanaInvestmentPlan.

ThefirstsetofcriteriarelatetoSREP priorities,namely:

• Potentialforscale-up-increasedinstalledcapacityfromrenewableenergy;

• Potentialfornewdirectbeneficiaries-increasedaccesstoenergythroughRE;

• Contributiontolowemissionsdevelopment;

• Costeffectiveness-affordabilityandcompetitiveness;

• Productive use of energy – promotion of the use of RE for productive andincome generating activities;

• Economic,social,andenvironmentalbenefits;

• Economicandfinancialviability;

• LeveragingofadditionalresourcesintotheREsector(targetratioof1:4);

• Genderequity-contributingtomainstreamingofgenderinREsector;and

• Co-benefitsofREscale-up.

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ThesecondsetofcriteriapertainstotheGoG’s policy priorities,namely:

• Contribution to Ghana’s universal access to electrification program withspecialemphasisonremotecommunitiesthathavenotyetbenefitedfromgridelectrification;

• Contribution to the 10% renewable energy target inGhana’s energy supplymix; and

• Readinessandavailabilityofsupportingdocuments.AfewotherfactorswereconsideredtoassessthereadinessoftheidentifiedclusterofpriorityREinvestments,namely:

• Ongoing efforts ledby theGoGandother development partners for similarassignments or areas;

• SupportingtheGoG’seffortstobridgethepowersupplyshortfallandhalttherelatedloadsheddingthatisaffectingmanypartsofthecountry;

• Presenceofcommittedandcapableinvestmentpromoters;and

• Availabilityofrequisiteexpertiseandskillsrequiredfromthestageofconceptionto development, construction, commissioning and long-term operation andmaintenanceaswellassubsequentscaled-upinvestments.

TheGoG,privatesector,civilsocietyorganizations,NGOs,developmentpartnersandMDBsworkedtogethertoapplytheaforementionedcriteriatoREtechnologiesanddeliverysystemsidentifiedashavingpotentialinGhana,namelytidalwave,utility-scalesolar,wind,mini-hydro,biomass,mini-gridsandnetmetering.Table6belowprovidesthescoresfortheREtechnologiesanddeliverysystemsconsideredforSREP,whilethedetailedresultsoftheassessment,evaluationandrankingarepresentedinAnnex4.

table 6. RankingofSREPPriorityRenewableEnergyTechnologies&DeliverySystems

Criteria Technologies & Delivery Systems

Tidal Wave

Utility-scale Solar

Utility-scale Wind

Small Hydro

Utility-scale

Biomass

Mini grid/Stand-

alone

Net metering

SreP 19 21 21 19 26 28 25GoG 7 9 9 5 10 11 10

Grand total 26 30 30 24 36 39 35

Therenewableenergytechnologiesanddeliverysystemsthatscoredthehighestwere:

• Mini-grids&stand-alonerenewable-basedelectrification;

• Utility-scaleBiomass;

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• NetmeteringbasedPV;and

• Utility-scalesolar/wind.

TheseREtechnologiesanddeliverysystemswerevalidatedduringtheconsultationsheldwithkeystakeholdersinthecountryduringthepreparationoftheIP.Thestakeholdersconsulted includenational institutions,privatesector,civilsocietyorganizationsanddevelopmentpartners.

BasedonthoseconsultationsandincollaborationwiththeMDBs,theGoGdecidedtoprioritizetheserenewableenergytechnologiesanddeliverysystems.However,afterfurther consideration driven by theSREP funding limit ofUSD 40million, theGoGdecided to seek alternative funding fromother sources such as theGreenClimateFundoreventually requestsupplementalSREPfundingfor theutility-scalebiomassoption.Consequently,SREPsupport issought for the followingthreeprojects:

• Project1-Renewableenergymini-gridsandstand-alonesolarPVsystems;

• Project2-SolarPVbasednetmeteringwithbatterystorage;and

• Project3-Utility-scalesolarPV/windpowergeneration.

Toensuresuccessfulimplementationandscale-upofthethreelistedflagshiprenewableenergy investments, theSREP-Ghana IPwill include aparallel technical assistanceinitiativethatwillhavetwothematicthreadswhichwillbeastand-aloneproject:

• Project4-Technicalassistancetoscale-uprenewableenergy.

ThefirstthreadwillfocusoncapacitybuildingactivitiesthatwillaimtomobilizeandmotivateexistingskilledGhanaianpersonneltoensuretheireffectiveandcommittedparticipationinGhana’sSREPprogram.Suchactivitieswillfurtherexpandthetalentpool of Ghanaian RE experts to address the twin-challenge of future scale-up ofidentified investments and the high-turnover of skilled staff that bedevilsmany REdevelopment projects.

Thesecondthreadwillfocusonpolicysupportactivitiesandwillbedesignedtoenhancemore effective and streamlined implementation of existing policy and regulatoryinstruments that support RE investments inGhana,with a focus on facilitating theparticipationoftheprivatesector.Wherenecessary,thepolicysupportactivitieswillcomplement the GoG’s efforts to bring on board additional policy, regulatory andinstitutionalinstrumentstofacilitatescale-upofrenewableenergydeploymentacrossthecountry.ThisTAprojectwillbefundedbytheAfDB-managedSustainableEnergyFundforAfrica(SEFA).

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PROGRAM DESCRIPTIONBased on the analysis of the Ghana RE sub-sector and the screening of variousrenewableenergyoptions,summarizedinthepreviouschapters,theMoPdecidedonthestructureoftheIPtobeco-financedbytheSREP.Thissectionpresentsthegeneralarchitecture of the SREP-Ghana IP, with its priority areas and investment projects,highlightingtherolesandcontributionsofstakeholdersandinstitutionalarrangementsforprogramimplementation.Figure8presentsahighleveloverviewoftheprogram.Theprojectconceptsforthepriorityinvestments,detailinghowtheMDBsandotherpartnerswill support the implementationofspecific investmentsaswellas the roleSREPwouldplayinthoseprojects,areincludedinAnnex1.

Figure 8. SREPGhanaProgramOverview

Investment Projects co-financed by SREP

PROJECT

Renewable energy mini-grids and stand-alone solar PV systems

Executed by: MoP and AfDB

Funded by: - SREP: USD 17.5 million- AfDB: USD 27 million- DPs: USD 12 million- GOG: USD 8 million- Beneficiaries & private sector: USD 18.5 million

1

Solar PV basednet-metering with storage

Executed by: EnergyCommission and AfDB

Funded by:- SREP: USD 12.5 million- AfDB: USD 15 million- DPs: USD 12 million- GOG: USD 8 million - Beneficiaries & privatesector: USD 45.5 million

2PROJECT

Utility-scale solar PV/wind power generation

Executed by: private sponsors and IFC/AfDB

Funded by: - SREP: USD 10 million- IFC: USD 10 million- AfDB: USD 10 million- Beneficiaries & private sector: USD 20 million

3PROJECT

Technical assistance to scale-up renewable energy

Executed by: Energy Commission and AfDB

Funded by:- SEFA: USD 1.5 million- DPs: USD 2.5 million

4PROJECT

SREP GHANA PROGRAM

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1. PROGRAM OBjECTIVEThe program objective is to assist the GoG in meeting its 10% renewable energytargetby2020aswellasitsuniversalelectrificationgoalthroughtheimplementationofflagshiprenewableenergyinvestmentsthatwouldprovidemodelsforscale-upandleverageadditionalprivateandpublicfinancialresourcestothecountry’sREsector.TheprogramwillbuildonpreviousandongoingGoGeffortsinthesectorandprovidetechnical assistance thatwill build the capacity of theGhanaian renewable energyplayers and ensure effective implementation of newly instituted policy, regulatorymeasuresand incentives toaccelerateREdeploymentacross thecountry.

The program will replicate innovative approaches that have proven successful insteppingupREdissemination inGhana. InaccordancewithSREPmodalities,bothIPgoalswillbeachievedthroughan integratedapproach that includes investmentsinrenewableenergies;capacitybuildingforstakeholders;promotionofprivatesectorinvolvement; gender inclusion; and provision of adequate technical assistance. Inaddition,theprogramwillsupporttheconsolidationofthesectorregulatoryframework.Theintegratedprogramapproachassumesthattransformationalchangeisonlymadepossiblebyimprovingenergymarketconditionsandfinancing,aswellas improvingtheenablingenvironmentformobilizingprivatesectorinvestors.Theseconditionsareindispensableforanyreplicationandscaling-upofpublicandprivateinvestmentsinrenewable energy.

2. EXPECTED OUTCOMESThemainexpectedoutcomesoftheSREP-Ghanainclude:

• Aminimum2%contributiontotheincreasedshareofrenewableenergyinthecountry’senergysupplymixtoreach10%by2020aspertheGoG’sobjectiveby supporting thedevelopmentof innovativeREoptions suchasPV-basednet-metersaswellasutility-scalesolarandwindpowerprojects.

• Atleasta20%contributiontotheremainingunelectrifiedpopulationinlinewithGhana’seffortstorealizeuniversalaccesstoelectricityby2020byconnectingcommunities that cannot be cost-effectively reached by conventional grid-basedruralelectrification.

• Expansionofprivatesectorparticipationand investment in thecountry’sREsectorbyensuringmoreeffectiveimplementationofexistingrenewableenergypolicies,regulatoryandincentivemeasures.

• ExpansionoftheexistingbaseofGhanaianREexpertise.

• AmainstreamedgenderdimensioninREdevelopment.

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3. DESCRIPTION OF PROGRAM COMPONENTS Ghana’sSREPInvestmentPlancomprisesthefollowingfourprojectcomponents:

1. RE mini-grids and stand-alone solar PV systems: construction of 55renewableenergy-basedmini-gridsand35,250stand-alonePVelectrificationsystems installed in 500 rural communities.

2. Solar PV based net metering with battery storage: installationof15,000solar PV net metering systems.

3. Utility-scale solar PV/wind power generation: providingfinancetoGhana’sfirstprivatesectorutility-scalewindandsolarplants thatareexpected toleverage substantial investments from the private sector.

4. Technical assistance to scale-up RE: capacitybuilding forkeyrenewableenergy players and policy support to the GoG.

Thefollowingsectionsprovidemorecomprehensivedescriptionsofeachoftheaboveprojects.DetailedprojectconceptnotesareinAnnex1.

Although theSREP isunable to fundutility-scalebiomasspowergenerationat thistimeasaddressedintheprevioussection,theGoGisseekingalternativefundingfromothersourcessuchastheGreenClimateFundandeventuallyrequestingsupplementalSREPfundingforthisoption.Detailedinformationonthisoptionisthereforeincludedasapotentialproject5:

5. Utility-scale biomass power generation: development of biomass energy power plants with the initial focus being on agro-industrial by-products/wastes (palm oil cocoa, sugar, rice and wood industries).

3.1. Project 1: RE Mini-grids and Stand-alone Solar PV Systems

About 20% of Ghana’s total population (representing 5 million people, based onthe2010GhanaStatisticalServicepopulationcensusreport)donothaveaccesstoelectricity,outofwhichabout2.9million reside in lakesideand islandcommunitiescreatedbytheAkosomboDam.Theseislandsandlakesidecommunitiesarethemostdifficult anduneconomical areas to electrify through thenational grid electrificationscheme.Thechallengesposedby theelectrificationof thesecommunitiesarenowseenasasignificanthurdleinthecountry’smovetoachieveuniversalelectrificationaccess(atleast90%oftotalpopulation)by2020.28

3.1.1. Objective

Themainobjectiveofthisprojectistoencouragesustainablepublicandprivatefinancing

28Inspiteofthis,thecurrentadministrationintendstoachievethistargetby2016,aheadoftheoriginalschedule.

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forscaling-uprenewableenergymini-gridsandstand-alonePVsystemstoachievetheGoGuniversalaccesspolicybyelectrifyinglakesideandislandcommunitiesinGhana,with much focus on female-headed households and SMEs.

3.1.2. Project Components

Public sector-led renewable energy-based mini-grid component

• Procurementandinstallationof55mini-gridstoserviceatotalpopulationof137,500(26,442householdsincludingSMEs,publicfacilitiessuchasschools,clinics,andcommunitywaterschemes,etc.,estimatedloadof16,500kW29 at acostofUSD37million).

• Developmentofaframeworkfortheintegrationofmini-gridsintotheexistinggrid-connectedruralelectrificationmodel.

• Fine-tuningofproposedownership,operationandmanagementmodelsunderthe ongoing seven pilot initiatives (4 pilots with GEDAP/WB funding, 1pilotwithSECOfundingand2pilotswithKoreanfunding)andadoptionofthemostsustainable and scalable model.

Private-public sector led stand-alone solar PV component

• Installation of 20,500 stand-alone systems to meet desirable loads forhouseholdstoserveanestimated106,600peopleusingapartialsubsidyandcredit facility under the private sector-led initiative.

• Installationof1,350stand-alonesystemsforschoolstoservesome243,000students.30

• Installationof500stand-alonesystemsforhealthcentresand400stand-alonesystemsforcommunitiestoserviceanestimated215,000people.31

• Review of the proposedmodels to restructure the financing scheme of thestand-alone component.

• Zoningandprioritizingcommunitiesforeffectiveandefficientdelivery.

3.1.3. Rationale for SREP Financing

Increased access to electricity and improved reliability of power supply that resultfrom sustainable new mini-grids and the Solar-PV stand-alone systems is essential tobridgethesocioeconomicdisparitiesbetweenGhana’surbanandruralpopulation,includingfemaleheadedhouseholds.Tosustainreliablepowersupplytodeprivedrural29 Anestimated120Wperpersonbasedondatafromongoingmini-gridinitiativesandruralelectrificationstatisticsfromtheutilities(ECG/NEDCo).30Assumptionof180studentsperschool(leastoptionfromGhanaEducationService,numberofstudentsbenefitingcouldincreasesignificantlytoabout45%more).31Onaverage (usingGEDAPdata,eachhealth facilityservicesabout350peopleand thecommunitylightingandenergyservicecenterbenefitsabout100peoplepersystem(asystemcomprisesadesirableenergyservicecenterand4-10solarstreetlightsforpubliclighting).

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communities,investmentsmustremainfinanciallyviableafterprojectcompletion.Toenablethedevelopmentofmini-grids,theSREPwilladoptaninnovativemechanismtoprovidecapitalsubsidiesandlong-termconcessionalfacilitiesmodeledalongtheconventionalruralelectrificationscheme.Tariffswillallowtheoperators(community,privatesectorandtheGhanaRenewableEnergyAuthority)tofullyrecoveroperationandmaintenancecostsoftheinvestmenttoensurelong-termsustainability.

Furthermore,theSREP-Ghanawillremovekeybarrierstoprovidingsolar-basedstand-aloneelectricitytoruralareas,including:technicalproblems;poorconsumerperceptionandlimitedawarenessoftheadvantagesofthesystems;andlackofavailablefinancingtomakethesesystemsaffordableforlow-incomeconsumers.SREPwillfine-tunetheBank/GEDAPARBApexBankmodelforstand-alonesolarsystems,tobringonboardawiderrangeoffinancinginstitutions(suchascommittedindividualruralbanksandthosewhichfocusonmicrofinance),privatesectorpartners,MDBsandcommunity-basedinstitutions(NGOsandcivilsocietyorganizations)toensuresustainablescale-upunderSREP.

Toprovidelong-termconsumerloanfinancingforthestand-alonecomponent,alineofcreditwillbecreatedandoperatedasarevolvingfundforon-lendtocredibleprivatesector and community-basedmicrofinance firms. The structurewill be detailed outtoensureparticipatingfinancingpartnersareabletorefinanceloanswithreasonabletermsofrepaymentoverinitialinvestmentandmajorcomponentsreplacement.Also,SREP will provide partial grants to customers or consumers to make stand-aloneSPVsystemsaffordableandcreatecriticalmassdemandasan incentive toserviceprovidersandsuppliersoperating in theseremoteandrelativelymarginalizedareas.Thiswillalsohelpimproveenergyaccesstoremotecommunities,themostvulnerableincluding female-headed households.

Finally,SREPwouldmobilizeadditionalconcessionalfinancingduringimplementationforboththerenewablemini-gridandstand-alonecomponentsfromotherdevelopmentpartners and serve as themain flagship program for the sub-sectorwithwhich allpartnersmustwork.

3.2. Project 2: Solar PV based Net Metering with Battery Storage

In an effort to meet the 11% average electricity demand growth rate, the GoG’sstrategy exploits all the opportunities of power generation available to the country.Thisincludestheuseofconventionalandnon-conventionalpowergenerationsystemssuch as renewable energy net metering technology.

Given the high electricity demand, GoG is unable, on its own, to cope with themagnitudeofinvestmentsrequired.KeytotheGovernment’sstrategyisthecreationofanenablingenvironmenttoencourageprivatesectorparticipation.Thishashowever,notyetyieldedtheanticipatedresults.TheexpectedinvestmentsfromIPPshavenotbeenforthcoming,whiletheenergysectorcontinuestoexperienceelectricitysupplychallenges. This has led to frequent load shedding with its attendant socioeconomic

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adverse impacts on industries and commercial businesses, particularly SMEs andessentialpublicservices(hospitals,schools,etc.).Thissituationhasresultedinhighdemandforfossilfuelpowered-gensetsbackupsolutionstokeepbusinessesrunning.

To help address these challenges, the viability of clean, reliable and cost effectivepowersolutionsinlinewiththeGoG’senergypolicyneedstobedemonstrated.Inthisregard,renewableenergy-baseddistributedgenerationhasbeenidentifiedasoneofthesolutionstowhichtheprivatesectorcanplayacentralrole.Net-meteredsolarPVsystemswithbackupstoragecouldprovideenvironmentally soundandsustainablesolutions for businesses to self-generate and continue operating when there is apoweroutage.Theexcesspowercanbeexportedtothegridunderapowerexchangescheme,whichwill relievethegridandreducetheelectricitybillof thenet-meteredconsumer.

3.2.1. Objective

Theobjectiveistodevelopacomprehensivenetmeteringprogramandthedeploymentofatleast15,000unitsofroof-mountedsolarPVsystemstoreducetheeconomiccostofpoweronSMEsandhouseholdsand increaseREconstribution in theelectricitygenerationmixby25-30MW.

3.2.2. Project Components

Thenetmeteringprojectwillhavethefollowingcomponents:

Investment

• Deploy 15,000 grid connected solar PV systems equipped with back-upstoragecapacitytomeetdesirable loadsintheeventofapoweroutage.Ofspecialinterestwillbethedeterminationofafinanciallyviableoptimumback-up storage capacity.

Technical Assistance

• Developacreditrecoveryfacilitythatusestheelectricitybillingsystemsandlocalbankinginstitutionstofinancethehighup-frontcostofnet-meteredPVwith storage systems.

• Developastandardcontractbetweentheutilityandthenet-meteredcustomersanddecentralizedapplicationprocessregime.

• Studytheimpactofalargenumberofdistributedgeneratorsonthevoltage,frequencyandharmonicsofthedistributionnetworksandestablishappropriatestrategiesfortheimplementationoftheambitioustarget.

• Developaserviceprovider-certification regimeandsupport the trainingofasignificantnumberofGhanaianrenewableenergyserviceproviders/expertsinlinewiththesectorlocalcontentandparticipationrequirements.

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• CapacitybuildingofrelevantstakeholderstothenetmeteringprojecttargetingkeystakeholderssuchasGRIDCo,ECG,NEDCo,MoP,EC,PURC,solarPVserviceproviders,beneficiariesandbanks.

Implementation Support

• Providesupportfortheoperationalandmanagementcostoftheimplementationteam.

3.2.3. Rationale for SREP Financing

Consideringthehighupfrontcostandtheperceivedhighriskoffinancingrenewableenergy projects, concessional financing from SREP will help reduce the upfrontinvestmentcostofnetmeteringwithbaterystorageoption,andboostdemandandcustomer confidence while encouraging women and youth participation.

Sincethecompletionofthepilotgrid-connectedsolarPVproject,additionalfundingtoscale-uptheprojectcouldnotbesecuredtodate.SREPwillleveragetherequiredfinancingandprovideacomprehensiveframeworktoscale-upthepilotgrid-connectedproject.TheexperienceinGhanacouldthenbereplicatedintheECOWASsub-regionandcreateneweconomicopportunitiesfortherenewableenergyindustry.

3.3. Project 3: Utility-Scale Solar PV/Wind Generation

InOctober2014,theGoGannouncedarevisedFiTforutility-scalePVandwindthathasmade investment in these technologies an attractiveproposition.However, thenewFiT(indicatedinTable3)havesomeelementsthatarecurrentlyhinderingthefulldevelopmentoftheutility-scalesolarandwindsub-sectors.TheFiTareofferedforamaximum10yearPPA,whichisperceivedtooshortaperiodtoattractthelong-tenorprivatefinancingnecessarytomakeutility-scaleprojectscost-effectiveandfinanciallysustainable.

While the potential returnson investment inutility-scalePVhasstimulated interestfromanumberofdevelopers(asmallnumberoffirmsinvestedlimitedamountsintheearlydevelopmentofREprojects)todate,nowindprojecthasreachedfinancialcloseor started construction, and only one corporate-financed solar PV project is underconstruction.

3.3.1. Objective

TheobjectiveofthisprojectistoassisttheGoGtoovercomekeybarriersthatpreventthegrowthandexpansionoftheutility-scalesolarPVandwindmarketinGhanabycatalyzingthefirstprivatesectorproject-financedutility-scaleREplants,demonstratingtheGhanaianREsectorpotentialtofinanciersandhelpingattractfurtherinvestmentin the future.

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3.3.2. Rationale for SREP Financing

SREPfinancingwillhelpearlyprojectsmitigatesomeoftheperceivedrisksassociatedwithfirst-moverprojects,suchasFiTpaymentriskandtherelativelyshortvalidityofFiT(10years).Theserisksarehavinganadverseimpactonprivateinvestors’confidencetofinanceutility-scalewindandsolarPVinGhana,whichcouldpotentiallydelaythedevelopmentof theentiresub-sector.This isdemonstratedbythe fact that there isonlyoneprojectdeveloperthathasreachedtheconstructionstagesincethefirstFiTwereintroducedon1September2013.ConcessionalfinancingfromSREPwillenabledeveloperstonegotiatelongerPPAsatlowertariffsthatwouldbemorecommensuratewithutilities’abilitytopayandtherebyreduceoneofthekeyprojectrisks.

Moreover, successful financial closureanddevelopmentof thefirst fewutility-scaleREprojectswithsupportfromSREPareexpectedtodemonstratetheviabilityofREtechnologiesinthecountryaswellasthesoundnessoftheregulatoryregimetosupportthem.Whilstachangeintheregulatoryframeworkmaybenecessaryinthemediumtolong-terminordertofurtherenhancetheREFITmechanism,thisisalengthyandcumbersomeprocessthatrequirescarefulstudyandsomeinitialexperiencewiththeexistingmechanism.TheobjectiveofthisprojectistosupportthedevelopmentofthefirstREprojectsundertheexistingregulatoryframeworkinordertodemonstratebothitsstrengthsandweaknesses.Itsweaknessescanthenbeunderstoodinmoredetailandinthecontextofrealexperience,whichwillenablemoreinformedandeffectiveenhancementoftheregulatoryframework.

Concessional financing from SREP can also help mitigate the perceived investorriskofweakoff-takersbyhelpingtobringREprojecttariffsdowntomoreaffordablelevels, thereby reducing the futureburdenofREonfinanciallychallengedGhanaianutilities.Bycatalyzingthefirstutility-scaleREprojectsinGhana,SREPwillalsohelptheGovernmentcarefullyassess thegrid impactofutility-scaleREandmakemoreinformedplanningdecisionsforscaling-upREinthefuture.

SREP support is also expected to pave the way for the leveraging of substantialfinancingfromtheprivatesector forutility-scalewindandsolarPVdevelopmentbyhelpingthefirstprojectsobtainappropriate long-termfinancing.This isexpectedtostimulatethegrowthofanascentlocalREprojectdevelopercommunity.Successfulscale-upoflarge-scalewindandsolarPVsectorsinGhanaisexpectedtogeneratejobsduringtheconstruction,operationandmaintenancestages,whilehelpingtoalsobuild localREcapacity.

3.4. Project 4: Technical Assistance to Scale-Up Renewable Energy

TheGoGhasestablishedkeypolicyandregulatorymeasurestosupport renewableenergydevelopment.However,inspiteofthesemeasures,thepaceofdevelopmentofREprojectsbyprivatedevelopershasbeenratherslow.Infact,manygapsintheexisting renewables regulatory framework (specifically, the Renewable Energy Act)havebeenidentified,namelythequestionsofwhatistechnicallyfeasible,economically

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desirableandfiscallyresponsiblefortheintegrationofREintothenationalgridunderthe current context and in the future.

Nationalpublicstakeholders(MoP,EC,ECG,GridCo,NedCo,PURC),withthesupportofdevelopmentpartners,mainlyGIZ,have takenmeasures toaddresssomeof theidentifiedgapsthatslowtheimplementationoftheREAct.Nevertheless,therearestillsignificantbarriersandconstraintswhichmustbeaddressed.

3.4.1. Objective

Theobjectiveof thisproject is toassist theGoGand itskeypartners in theprivateandfinancialsectorstoovercomekeytechnical,financial,regulatoryandinstitutionalbarriersthatinhibitthescaling-upofrenewableenergyinvestmentsinthecountryandmayconstrain thesuccessful implementationof flagship renewableenergyprojectsfinancedunderthisprogram.

3.4.2. Project Components

Technical Component

• Support for comprehensive resource assessments for a wide range ofrenewables(tidalwave,biomass,wind,etc.)thatprovidelong-termseasonaldata (forexample,biomasssupplyormunicipalwaste fordifferentseasonalperiods)aswellasend-useconsumerandgenderdisaggregateddatathatcanassistthedesignofdifferentREtechnologiessuchasnet-meteredPVsystems.

• Support capacity development ofmain utilities (distribution companies andGRIDCo) to undertake dynamic grid studies to determine the proportion ofrenewablesthatcanbesafely integrated intothenationalpowersupplyandaccurately forecast future estimates of the contribution of renewables as the Ghana’spowersectorcontinues togrow insizeandcoverage.

Financial & Project Development Component

• Provideatransactionsupportfacilityorcost-sharedgrantsforpre-investmentworkuptofinancialclosurefordevelopersandfinancialinstitutions.

• Pilot-testandrecommendthemostappropriatePartialRiskGuaranteesandotherriskmitigationinstrumentsaswellasmodelrenewableenergypaymentagreementsforprojectdevelopersinGhana.

Regulatory & Institutional Component

• AssisttheGoGmovetoabankablestandardmodelPPAofsuitabledurationthatisappropriateforsmall-scalerenewableenergydevelopers.

• Supportthedevelopmentofatariffmethodologyforancillaryservicesrequiredfor smooth integration of renewable energy generation in the national grid and

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improvethecurrentREFiTtoaddressbankabilityissues(forexample,limitationofthevalidityofthetariffto10years).

• SupporttheMinistryofPowertocreatetheRenewableEnergyAuthoritywhichwouldeffectivelyimplementrenewableenergyprojectsonbehalfoftheGoG.

• SupporttheMoPtocreatea“one-stopshop”solutiontofasttrackgovernmentservices related to RE projects that can address all of these issues. SREPtoprovidesupportforaprototypeone-stopcentreforrenewableswithintherelevantsectoragencytoaddresstheissuesofinconsistencyviewsamongthesector actors.

• Support the RE sector to encourage consultation with women, femaleassociations/NGOsandencouragethemtoapplyindecisionmakingpositions.

3.4.3. Rationale for SREP Financing

Thiscomponentisessentialtolaythetechnical,financial,regulatoryandinstitutionalfoundations for successful implementation of the SREP progam and associatedflagship renewable energy projects.

3.5. Potential Project 5: Utility-scale Biomass Power Generation

Biomass resources include supply fromagricultural residues (maize, sorghum, rice,etc.)andfromagro-basedindustries(sheabuttercompanies,cocoa,rubber&sugarprocessingplants,bio-ethanolplants,sawmillsandpalmoilfactories).Thereisalsoalargepotentialfordedicatedenergyplantationsondegradedland.Biomassresidues/waste resources are concentrated and could provide a reliable feedstock for largebiomass power plants. Currently, these wastes are disposed of by burning, andconstituteafire,environmentalandhealthhazard.

Withregardtotheuseofagriculturalresiduesinsmall-scaleestablishments,genderdifferentiation in termsof respectivegender levelsof involvement ismoreapparentin the agro-based industries. This is because women form the majority of the rural population.Asa result, theyoperatemostof theagro-based industries.

3.5.1. Objective

Theobjectiveofthisprojectistodemonstratetheeconomicviabilityofbiomassasaresourceforcleanandsustainablepowergeneration,whichwillcontributetotheGoG’stargetofreachingatleast10%renewableenergymixby2020andtothedevelopmentofruralcommunitiesinGhana.Inthissector,theprojectwillresultinempoweringruralwomenandyouthineconomicdevelopmentandjobcreation.

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3.5.2. Project Components

Theprojectwillhavethefollowingcomponents:

• Identificationofpriorityagro-industriesandlocationsaswellastheappropriatebiomass technologies including thenumberofwomenandyouthworking inthe sector.

• Resourceassessmentsandconfirmationoffeedstocksecurity.

• Feasibility studies.

• SupportinnegotiatingPowerPurchaseAgreements.

• Definitionofappropriatemanagementandinstitutionalarrangements.

• Financingtheconstructionandcommissionofpilotbiomassplants.

• Capacitybuildingandpolicysupport.

3.5.2. Rationale for SREP financing InspiteofthelargeuntappedpotentialforthedevelopmentofbiomassplantsinGhanaandthecurrentappealingFiTregime,thereisnosignificantassistancefromtheGoG,development partners, or the private sector. SREP financing would therefore helpmitigatesomeoftheperceivedrisksassociatedwithfirst-moverand/orotherhigh-riskprojects,suchasfeedstockcollection.Asaresult,itwoulddemonstratetheeconomicviabilityofbiomassasasourceofpowerandpavethewayforlocalandinternationalprivatesectorinvestorsandfinanciers.

SREPsupportwouldalsolikelyjumpstarttheleveragingofsubstantialfinancingfromtheprivatesectorforutility-scalebiomassprojectbyhelpingthefirstprojectsobtainappropriatelong-termfinancing.Thiswould,inturn,stimulatethegrowthofanascentlocalbiomassprojectdevelopercommunity.Successfulscale-upofbiomassprojectsinGhanahasthepotentialtofurthergeneratejobsduringtheconstruction,operationandmaintenancestages,whilehelpingtobuildthelocalREcapacity.Itwillalsohaveapositiveimpactongender,benefitingmostlywomanandchildren.

Thebenefitsofthisprojectwouldaccruedirectlythrough:timesavingsfromwomen’sbiomasscollection; reducedhouseholdexpenditureonwoodfuelandcharcoal;andpotentialpromotionofwomen’senterprisesinthebiomassandwaste-to-energyvaluechains.Thelastmentionedbenefitwouldsubsequentlyindirectlyimpactalliedsectors,suchasagro-industry—whoseworkforceislargelycomprisedoffemaleemployees—byprovidinginputs.

4. PROGRAM IMPLEMENTATION ARRANGEMENTS TheRenewable&AlternativeEnergiesDirectorate(RAED)willberesponsiblefortheoverallprogramcoordinationand implementationofaspectsof theSREP-Ghana, in

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collaborationwiththerelevant/beneficiaryinstitutionssuchasECG,PURC,EC,NEDCoand the GEDAP PIU.

At theproject level,RAEDwill implementProject 1 (REmini-grids and stand-alonesolar PV systems), while the Energy Commission will be implementing Project 2(SolarPVbasednetmeteringwithbatterystorage).Technicalassistancetoscale-upRE(Project4)willbe implementedbybothRAEDandtheEnergyCommission,andProject3(Utility-scalesolarPV/windpowergeneration),willbedrivenbyprivatesectorcompanies.

TheRAEDhasbeenimplementingmulti-donorfundedprojects,suchasWB/IDA/GEF,Spanish,JapaneseandChinesegovernment-fundedREprojects, inaddition to theongoingfourpilotmini-grids.TheRAEDhasthereforedemonstrateditscapabilitytostructure and implementREprojects andwould leverage the experience gained tofacilitatethespeedyandefficientimplementationoftheprojectsunderitsresponsibility.The RAED is currently implementing the renewable energy component of the USD210millionmulti-donorfundedGhanaEnergyDevelopmentAccessProjectI&IIwhichincludestheongoingmini-gridsandoff-gridaccessinpublicinstitutions.

TheEnergyCommissionhasovertheyears, implementedkeyflagshipprogramsonbehalfoftheGoGincludingthecontinent’smostsuccessfullightingretrofittingprogram,whichsavesGhanaover120MWofpowergenerationinvestmentsandC02emissionsofabout112,320tonsperyear.TheCommissionsuccessfullypilotedtheREnetmeteringinitiativeandhasdevelopedkeypolicy instrumentsand technicalguidelines for therenewableenergyindustry.Recently,theECpilotedtheUNDPfunded“PromotingofAppliance of Energy Efficiency and Transformation of the Refrigerating AppliancesMarket in Ghana” project with the objective to improve the energy efficiency ofappliancesmarketedandused inGhana through the introductionof acombinationof regulatory tools such as Minimum Energy Performance Standards and Information Labels (S&L). The Energy Commission is finally implementing the Wind ResourceAssessmentcomponentoftheGEDAPprojectandtheSE4All Initiative.

TheRAEDwillbetheinterfacebetweentheGoGandfinancingpartnersandwillpreparequarterlyprogressreportsonkeyaspectssuchasdesign,procurement,implementation,financialmanagementandimplementationofenvironmentalandsocialmanagementmeasures,aswellastheachievementoftheprogram’sdevelopmentobjectivesandrelatedmonitoringindicators.Withrespecttothegenderaspect,agenderexpertwillbeengagedtostructure,supervise,monitorandevaluatetheeffectiveimplementationofgendermainstreaming.Amulti-sectorialSREPProgramSteeringCommittee(PSC)similartotheGEDAPPSCwillbesetuptoprovideoversightresponsibilitytoallSREPactivitiesinGhana.Thisistoensureinclusivedecision-makingandfacilitatethesmoothdeliveryoftheprogram.TheSREPPSCwillmeetwithinanagreedtimelinetodiscusstheprogramandprovidesalientinputsinenhancingoveralldelivery.

TheRAEDwill submit reports to theCIFAdminUnit through theSREP leadMDB.ThePolicyPlanningMonitoringandEvaluationDirectorate (PPMED)of theMoPwillconsolidateinformationontheprogram’sresultsindicatorsfromreportsreceivedfrom

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implementing agencies in order to prepare consolidated quarterly monitoring andevaluation (M&E) reports for submission to the stakeholders.

The MoP shall create a special SREP implementation unit within the RAED andwhere necessary recruit key staff for the day-to-daymanagement of the program.Similarly,theEnergyCommissionwillcreateaspecialSREPimplementationunitforthe implementation of its part of the program.

OntheMDBsside,theAfDBwillberesponsibleforthe implementationofProject1(Renewablemini-gridsandstand-alonesolarPVsystems);Project2(SolarPV-basednetmeteringwithbattery storage); andProject 4 (TechnicalAssistance to scale-upRE). IFCwillberesponsible for the implementationof the investmentcomponentofProject3 (Utility-scalesolarPV/windpowergeneration).

TheGhanaSREPprogramimplementationstructureispresentedinFigure9below.

Figure 9. SREPGhanaProgramImplementationStructure

SREP Program Steering Committee

Advisory Services

SREP Program Implementation Unit (hosted in RAED) forProgram Level Coordination Program Level Monitoring & Evaluation Program Level Knowledge Management

Project 1: Renewable energy mini-grids and stand-alone solar PV systems

Project 2: Solar PV based net-metering with storage

Project 3: Utility-scale solar PV / wind power generation

Project 4: Technical assistance to scale-up RE generation

Local Governments Private Sector Civil Society

Coordination Arrangement

ImplementationArrangement

MINISTRY OF POWER (RAED) & ENERGY COMMISSIONFiduciary and Procurement Responsibilities

Decentralized Technical Services NGOSpecialized FirmsIndividual Consultants

5. PROGRAM CO-BENEFITSThedirectimpactoftheSREP-GhanaInvestmentPlanwillbetoengagethecountryinthelarge-scaledevelopmentofrenewableenergy.TheSREPwillhaveadirect,positiveimpactonthe livingconditionsof theGhanaianpeopleandtheproductivityof theireconomicactivities,alsoensuringareductioninGHGemissions,whichwillcontributetoimprovingclimateresilience.

Inadevelopmentparadigminwhichsocialandenvironmentalbenefitsareinextricablylinked,theGhana-SREPwillhelpto:

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• Reduce theexploitationofnon-renewableenergysourcesby increasing theshareof renewableenergy in thenationalenergymix;

• ReduceGHGemissionsduetotheuseoffossilfuels;

• Maximizeeconomicdevelopmentopportunities,includingthecreationofneweconomicactivitiesand jobsrelatedtonewtechnologieswithprivate-sectorparticipation;

• Improve the rural population’s quality of life, especially female-headedhouseholds, through household and institutional access to electricity; and

• Improvegenderequality.

Implementingtheseinvestmentswillyieldsignificantbenefits,amongwhichinclude:

• Reduceddependenceonfossilfuelsandthuslowerenergybills.

• Betteravailabilityofpolitical,administrative,andregulatoryinformationcapableofattractingforeigninvestmentforREdevelopment.

• Reducedlevelsofpoverty.InthequesttoimproveGhanaians’livingconditionsanddecreasethelevelofpoverty,theGovernmentrecognisesimprovedaccesstoandgreateruseof electricity asa keyenablingcondition.TheSREPwillsupportthiseffortinanenvironmentallysustainableway.

• Greaterprivate-sectorparticipation.TheSREPwillstrengthentheparticipationofprivate-sectoroperatorsinrenewableenergyproductionthroughinitiativesto:(i)buildtechnicalandorganisationalcapacities,especiallythoseforwomen,intheenergysector,(ii)improvelegalandregulatoryarrangementsthatengagetheprivatesectorinameaningfulway;and(iii)providenecessaryandadequatefinancetohelpdevelopthefirstutility-scalewindandsolarprojectsthatwilldemonstrate theGhanaianREsectorpotential tofinanciersandhelpattractfurtherprivateinvestmentinthefuture.

• Improved socioeconomic status of women. The SREP initiatives willcontribute to enhancing women’s quality of life by: reducing the time theyallocate to household chores; improving their access tomodern energy forincome-generatingactivities;andincreasingtheiraccesstomodernformsofcommunication. In rural communities, the availability of electric lightingandotherenergyservicescanleadtobettereducation,health,andpublicsecurity,especiallyforwomenandchildren.Onceacommunityhaselectricity,awiderangeof income-generatingactivitiesopensup forwomen (e.g., ice-makingandfood-processingbusinesses,smallretailshops,andrestaurants).SREPwillthereforecreateuniqueopportunitiesforwomeninparticulartomaximizethegainsundertheprogram.Thisinturnleadstogreaterfinancialindependenceandimprovedchildwelfare(asextraincomefromwomenislikelytobeinvestedinchildren).AccordingtotheGhanaLivingStandardsSurvey5,womenmakeup70%of foodcrop farmersandmostsmall enterprisesaredominatedbywomen (72%). In rural areas, 80% of businesses are operated by women.

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Theseincludesmall-scale,artisanalbusinessesofagriculturalproducts,suchascoconut,palmoil, fishandmeatproductsandgari (processedcassava).The SREP investment will thus improve the productivity, efficiency andcompetitiveness of these women-headed SMEs.

6. ADDITIONAL DEVELOPMENT ACTIVITIESKey activities supported by the development partners that complement SREPinvestments in renewable energy include the GoG-led GEDAP program that hasfinancedawiderangeofrenewableenergyactivitiesinthecountry.SupportedbytheAfDB,WBandSECO,GEDAPhaspromotedbothon-gridandoff-gridrenewables.Itsflagshipoff-gridsolarinitiativehasbeeninstrumentalinscaling-upsolarapplicationsin Ghana by working with local banks to finance small-scale solar home systems.SREPwillbuildonthenetworkofruralcreditagenciessupportedbyGEDAPtoensurethecontinuedflowoflocalfinancingtooff-gridREsolutions.GEDAPisalsosupportingseveralpilotmini-gridrenewableenergyprojectsthatareexpectedtoprovidemodelsforfurtherreplicationbySREP.GEDAPisalsoassistingindevelopingandexpandingGhana’s existing renewable energy resource base through the financing of smalland medium hydropower, wind and biomass resource assessments. Some of thecompleted resource assessments are already being used by private developers tomobilizefinancing inutility-scalewindpower–asectorthatSREPplanstosupportwith IFC assistance.

TheEnDevinitiative,managedbyGIZandsupportedbykeydonorpartners, isalsopromoting a wide range of renewables. This is primarily focused on small-scaleapplicationsofrenewableenergyforproductiveuse,whiletheGIZREprojectisinvolvedinassociatedregulatoryandcapacitybuildingactivities.Itsregulatoryworkongrid-connectedrenewables,bothsmall-scale(netmetering)andlargerscale(FITscheme,IPPs)willcomplementGhana-SREPupstreamregulatoryactivitiesthatareaimedatcreatinganenablingenvironmentforutility-scalesolarPVandwindinvestments.

Other key development partners of Ghana that are active in the renewable energysectorincludeKfW(utility-scalesolar)andAFD(hydroassessments).Thegovernmentsof China, Japan and Korea also support the GoG’s efforts to promote renewableenergydevelopmentinthecountry.TheirprogramsofassistanceinrenewableenergydevelopmentdovetailwellwithSREPpriority renewableenergy initiatives.

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FINANCING PLANThe totalestimatedbudgetforimplementingtheSREP-GhanaInvestmentPlanisUSD230million.InadditiontotheUSD40millionbeingrequestedfromSREP,theprogramisseekingcontributionsfromMDBs,developmentpartners,privatesectorinvestors,andcommercialbanks.TheGoGwillalsocontributetotheprogram.The SREP funding is being requested by AfDB and IFC. USD 30 million is beingrequested by the AfDB to implement Project 1 (Renewable energy mini-grids andstand-alonesolarPVsystems)andProject2(SolarPVbasednetmeteringwithbatterystorage),whileUSD10millionisbeingrequestedbyIFCtoimplementProject3(Utility-scalesolarPV/windpowergeneration).Project4(Technicalassistancetoscale-upRE)willbeimplementedbytheAfDBthroughitsSustainableEnergyFundforAfrica(SEFA)Trust Fund. Table7belowillustratestheprogram’sfinancingplan.Co-financingamountsaretentativeandwillbeconfirmedduringtheprojectpreparationphase,oncetheprojectcost isestimated more accurately. It is the understanding of the GoG that these requests are subjecttoconfirmationbythemanagementoftheMDBsanddevelopmentpartners.

table 7. SREP-GhanaIPFinancingPlan(inUSDmillion)

PROJECT SREP GoG AfDB* IFC DPs PI&B** Totalre mini-grids and stand-alone solar PV systems 17.5 8.0 27.0 0.0 12.0 18.5 83.0

Solar PV based net metering with battery storage 12.5 8.0 15.0 0.0 12.0 45.5 93.0

Utility-scale solar PV/wind power generation 10.0 0.0 10.0 10.0 0.0 20.0 50.0

technical assistance to scale-up re 0.0 0.0 1.5 0.0 2.5 0.0 4.0

totAl 40.0 16.0 53.5 10.0 26.5 84.0 230.0* Including the AfDB private sector window and the SEFA Trust Fund** Private investors & beneficiaries

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Thefinancingmodalitiesoftheprojectstobesupportedwillincludeacombinationofgrant,concessional loans,andguarantees.Theexactmodalitieswillbedeterminedduringtheimplementationstage(PhaseII)inaccordancewithrelevantSREPguidelines.This decision will take into consideration, inter alia: barriers to specific renewableenergytobesupported,thecountrydebtsituation,andrevenuegeneratingprospectsaswellasthefinancialrateofreturnoftheinvestment.

NB: TheUtility-scale biomass power generation project is kept in the SREP IP forfutureconsiderationbyaninterestedpartner/party,suchastheGreenClimateFundasandwhenitbecomesoperational.ItishowevernotindicatedintheSREPIPfinancingplansincethefundingforthisprojectisyettobesecured.

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ENVIRONMENTAL AND SOCIAL ASPECTS

UndertheSREP-GhanaIP,preparationofenvironmentalandsocial(E&S)studiesmustadhere to Ghanaian laws and regulations, as well as the E&S policies, guidelines,andstandardsoftheMDBs.TheleadimplementingentityfortheSREPpublicsectorprojects,theMinistryofPower,hasundertakennumerousprojectswiththeAfDB.Assuch,ithaspoliciesandproceduresinplacetoensurecompliancewiththeGoGandtheAfDBsocialandenvironmentalsafeguards.

1. APPLYING ENVIRONMENTAL AND SOCIAL SAFEGUARDS ON THE RENEWABLE ENERGY MINI-GRIDS AND STAND-ALONE SOLAR PV SYSTEMS PROjECTEnvironmental and Social Management Framework. In the case of the RE mini-grids and stand-alone solar PV systems project, since specific locations of investmentswillbedeterminedduringprojectdesign,anEnvironmentalandSocialManagementFramework (ESMF) will be prepared that defines the E&S planning, review, andclearing processes that follow national andMDBguidelines. The ESMFwill ensurethatenergyisproducedandutilizedinanenvironmentallysoundmanner.Itwillalsoprovideacorporateenvironmentalandsocialsafeguardpolicyframework,institutionalarrangements and capacity to identify andmitigate potential safeguard issues andimpacts of RE projects. The ESMF will be prepared in compliance with nationalguidelines and MDB safeguard policies. Through its Energy Sector Strategy, theGoGisfullycommittedtosupportandactivelyparticipateininternationaleffortsand

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cooperatewithinternationalorganizationsthatseektoensuresustainabledeliveryofenergytomitigatenegativeenvironmentalimpactsandclimatechange.Byadoptingmechanisms and procedures definedby the EPA and theAfDB/IFC, the ESMFwillinclude the following components:

• Environmental and Social Impact Assessment (ESIA) to identify keyenvironmentalandsocialimpactsandcorrectivemeasuresforeachsubprojectonce exact intervention locations are known.

• Environmental and Social Management Plan (ESMP) to translate the ESIA intocoordinatedactivitiesatlocallevel,withdetailedchecklistsandmitigationmeasures in order to address expected environmental and social impacts(especially for women).

• Resettlement Policy Framework (RPF) followed by Resettlement Action Plans (RAP), to present legal and institutional framework, eligibility criteria,methodologyforassetvaluationsandmechanismsforstakeholderconsultationsandgrievance redress.

• Gender assessment ensuring use of gender disaggregated participatorybeneficiary feedback and women-targeted communications campaigns toalertprojectbeneficiariesandaffectedpersonstotheexistenceoftheplannedgrievance redress mechanism.

For mini-grid subprojects, separate, comprehensive E&S assessments must beconducted including an ESIA, an ESMP, and a RAP. Additional specialised E&Smanagementplansand/or initiativesmayberequiredtobetteraddressthe impactsassociated with a given subproject.

2. APPLYING ENVIRONMENTAL AND SOCIAL SAFEGUARDS TO THE SOLAR PV BASED NET METERING WITH BATTERY STORAGE AND UTILITY-SCALE SOLAR PV/WIND POWER GENERATION PROjECTS Environmental and Social Assessments. For both SREP projects, separate,comprehensiveE&Sassessmentsmustbeconducted.Thesemust includedetailedstudiesaimedatuncoveringtheparticularE&Simpactsofeachproject.Thestudiesinclude an ESIA, an ESMP, and a full or abbreviated RAP.32 Adequate stakeholdergenderdisaggregatedparticipatoryconsultationsmustbeundertakenandguidethedevelopment of the E&S studies.

32 The type of RAP will depend on the number of persons affected by resettlement experienced as a result of the project.

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Stakeholder consultations. The ESMF contains detailed checklists andgeneric mitigation measures to ensure that potential impacts are addressedin E&S assessments and subprojectmanagement plans. In preparing therequireddetailedE&Sstudies(e.g.,ESIA,ESMP,andRAP),thesubprojectoperatorsmust adhere to the requirements for ensuring that participatory stakeholderconsultations are captured in the E&Spolicies,guidelines,andstandardsoftheMDBs. Participatory consultations willbe held with all stakeholders (includingministerial officials, representatives oflocalgovernments,theprivatesectorandassociations of civil society, includingwomen associations) in order to:

• provide adequate informationabout the nature, timing, andscope of the relevant subprojectimpactsandmitigationmeasures;

• highlight gender issues (in order to improvewomen’saccesstolower-cost and cleaner energy while reducing the time that women and girlsspendonfirewoodcollectionandimprovingincome-generatingopportunities);and

• guidestudydevelopment.

Responsibilities. Inthecaseofthepublicsectorprojects,theMoPwillhaveoverallresponsibility for procuring, supervising,reviewing and approving social andenvironmentalstudiesandassessments,implementing the E&S frameworks andany specializedmanagementplansand/or initiatives. Moreover, the MoP willorganize capacity building initiatives fortechnicalstaff,includingthoseofselectedoperators on issues related to socialand environmental management and

The Environmental Protection Agency (EPA) - formally established on 30December 1994(Act 490) - is the leading public body forprotecting and improving the environment inGhana.Ithastheresponsibilityofregulatingtheenvironmentandensuringtheimplementationof Government policies on the environment.The Agency has, inter alia, the followingregulatory and enforcement role(s):

• To issue environmental permitsand pollution abatement noticesfor controlling the volume, types,constituents and effects of waste,emissions,depositsorothersourcesofpollutantsandofsubstanceswhicharehazardousorpotentiallydangerousto the quality of the environment orany segment of the environment;

• To issue notices in the form of directives, procedures or warningsto such bodies as it may determine necessary for the purpose ofcontrolling the volume, intensity andquality of noise in the environment;

• Toprescribestandardsandguidelinesrelating to the pollution of air, water,landandotherformsofenvironmentalpollution including the dischargeof wastes and the control of toxic substances;

• To ensure compliance with anylaid down environmental impactassessment procedures inthe planning and execution ofdevelopment projects, includingcompliance in the respectofexistingprojects; and

• Topromotestudies,research,surveysandanalysesfortheimprovementandprotection of the environment andthe maintenance of sound ecological systems in Ghana.

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control.Itisexpectedthattheseimprovedcapacitieswillfacilitatetheimplementationofsafeguard instrumentsunder theSREP. In thecaseof theprivatesectorproject,nationalpoliciesaswellasIFC’sandAfDB’ssocialandenvironmentalsafeguardswillbe followed.

Projectorsub-projectoperatorswillberesponsible—i.e.,incompliancewithnationallaws and regulations and MDB safeguard policies, guidelines and standards—forconductingtherequireddetailedE&Sstudies(e.g.,ESIA,ESMP,andRAP);obtainingclearancesandlicensesfromrelevantauthorities;organizingstakeholderandgenderdisaggregated consultations; implementing all required mitigation measures; andconductingmonitoringactivities.Thecostsofalltheseactivitieswillbeintegratedintothebudgetofeachproject(orsub-projectinthecaseoftheoff-gridprogram).

ThedetailedE&Sstudiesmustbesubmitted toboth theEPAand theAfDB/IFC forreviewandapproval.EPAapprovalisbasedonGhanaianlawsandregulations,whilethatoftheAfDB/IFCisbasedontheirE&Spolicies,guidelines,andstandards.TheEPAwillberesponsibleforthereviewandclearanceofESIAsandESMPsforsubprojects.It provides a one-stop clearance process by involving all other key governmentalagenciesintheapprovalprocess.

3. ANTICIPATED ENVIRONMENTAL AND SOCIAL IM-PACTS Thefollowingenvironmentalandsocialimpactsaretypicalofthetypeofprojectsthatarebeingenvisagedinthisprogram:

Project type Major E&S concerns

General

Influxofforeignworkersorworkersfromotherlocalities.Resettlementofpeople.Constructionofinfrastructure,resultinginthereshapingoftopographyandmodificationoflandscapes.Potentialdeforestation.Land acquisition.

Mini-grids construction

Soil compaction and damage to vegetation due to equipment. Airpollution resulting from gas emissions and smoke exhaust fromgenerators, compressors, and vehicles. Deleterious effect of dustcarried by winds across exposed surfaces.

Waste generation Wastedisposal,pollutioncontrol,andsafety.

Biomass plantations Loss of natural habitats and indigenous species, displacement offood or other crops.

Wind power Aesthetics,noisepollution,andbirdfatalities.

Solar Recyclingofbatteriesandparts.

HIV/AIDS and Collaboration with Public Health Sector and Department of Public Works.AninfluxofworkersfromotherlocalitiesraisesconcernsofsocialconflictandtheriskofspreadingHIV/AIDSandotherSTDs.Theprojectswillestablishprocedures

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forgender-disaggregatedparticipatoryreportinggrievancesandlayoutmechanismsfor conflictmanagement and resolution. In the area ofHIV/AIDS, public-awarenessand education campaigns will be undertakenwith relevant local health authorities.Duringconstructionandoperation,theprojectswillensureadequatetraininginpublicsafetyhazardsandadherencetowarningsignsandstrictworkplaceruleswhichwilltargetwomenandwomen’sassociations.Prior tocommencingwork,acompliancemonitoring planwill be established aswell as a communication and outreach plantargetedatwomenandwomens’associations,especially).

Environment, Health, and Safety Management System. Subproject operators willdesign, construct, andoperate theprojects and implement anenvironment, health,and safety (EHS)management system.

Public Disclosure.ProjectandsubprojectimplementationwillrequirecommunicationandconsultationwithboththeGhanaianstakeholdersimpacteddirectlyandindirectlyby the projects and other stakeholders within and beyond the projects’ zones ofinfluence.DisclosureofthedetailedE&Sstudies(i.e.,ESIA,ESMP,andRAP)mustbedoneincompliancewiththepublic-disclosurerequirementsoftheAfDB/IFC.RelevantdocumentationwillbemadeavailableonthewebsitesoftheGoGandtheAfDB/IFCand through additional means.

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MONITORING AND EVALUATION AND KNOWLEDGE MANAGEMENT

This section describes the areas inwhich the key aspects and tools ofmonitoringand evaluation (M&E) and knowledgemanagement will be strengthened as part ofimplementing the SREP Investment Plan.

STRENGTHENING MONITORING AND EVALUATIONWith its resultsmeasurement framework, theM&E systemwill be considered as acentral part of the SREP IP design and implementation. As a key tool to plan andmonitor program activities, the system is essentially aimed at:

• Defining how transformational impactswill bemeasured before, during andafter the lifeof theprogram;

• Ensuringthatdatacollected,processedandanalyzedatthelevelofthethreeinvestment projects harmoniously feed into the programmaticM&E system;and

• Supportingtheknowledgemanagementandsharinginitiativesoftheprogram,by highlighting successful outcomes and lessons learned and recommending waystoimproveprogramimplementationanditstransformationalimpact.

Basedon a set ofSREPcore indicators, theSREPM&Esystemwill, to the extentpossible, be integrated into theexistingnationalM&Esystemof theenergy sector,whilesolvingsomeofitsmainconstraintsandbottlenecks,throughcapacitybuildinginitiatives. Therefore, its designwill avoid the development of parallel structures orprocesses formonitoring and evaluation.

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RESULTS FRAMEWORKThemainpurposeoftheSREP-GhanaIPresultsframeworkistoestablishabasisforfuturemonitoringandevaluationoftheimpact,outcomesandoutputsofSREP-fundedactivities.Inaddition,theresultsframeworkisdesignedtoguideGhanaandMDBsinfurther developing SREP-funded projects’ results frameworks. Accordingly, Table 8belowsummarizestheproposedSREPM&EResultsFramework,inlinewithexpectedoutcomes and results.

Morebroadly,theprogram’sdevelopmentoutcomesareexpectedtoencompassmanydimensions beyond those required for monitoring under the SREP guidelines. Among others,theseincludeimprovedreliabilityofelectricity;economicsavingstothenationandfinancialsavingstoconsumersfromlower-costelectricity;high-valuejobscreatedinnewenergysubsectors; lessvolatileelectricitysupply;andan improvedenablingenvironmentresultingfromthepositiveexperiencesoftheSREPinterventions,whichwillcreatetheconditionsfortransformativechangeinhowenergyissuppliedtothenation.

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table 8. SREPProgramandProjectsResultsFramework

Result Indicator Baseline Targets by 2020 Means of Verification

SreP transformative Impacts

Support low-carbon development pathways by reducing energy poverty and/or increasing energy security

National measure of energypoverty

MEPIa=0.62(2008,accessrateof56.1%)Electricity used in2014:24.3GWh

MEPIa =0.1(access rate of 90%)Electricityused:4.1kWhpercapita

Country-based reportingusinghouseholdsurveydata

ElectricityoutputfromrenewablesinGWhperyear

GWhperyear.b 115.6GWhperyear

Utilities and MoP

Increasedannualpublicandprivateinvestments($)intargetedsubsector(s)percountry

n/a USD230million National M&E

SreP Program outcomes

Increased supply of renewable energy

Increased annual electricityoutput(GWh)as a result of SREP interventions

Wind/Solarelectricity output:3.9GWh

Wind/Solarelectricityoutput:39.36GWhperyear

SREP Projects’ M&E systems

Off-grid:18.0GWhperyearSolar PV Net-Metering: 2.4GWhperyear

Off-grid:36.76GWhperyearSolar PV Net-Metering: 39.42GWhperyear

Increased access to modern energy services

Increased number ofwomen,men,businesses and communityservicesbenefittingfromimprovedaccesstoelectricity as a result of SREPinterventions

0.05(inmillion) Wind/SolarelectricityProject:~0.0626millionOff-gridProgram:~0.5millionSolar PV Net-MeteringProject: ~0.0949million

SREP Projects’ M&E systems

New and additional resources for renewable energy projects

Leveragefactor:USDfinancingfromothersourcescomparedtoSREP funding

USD40million

Additional financingleveragedfromthe SREP initial resources:USD190million

SREP Projects’ M&E systems

Avoided GHG emissions

AvoidedGHGemissions(tons CO2eperGWh)as a result of SREP interventions1

n/a

76,664tonsCO2e peryearonceSREPprojectsareoperational

SREP Projects’ M&E systems

a. MEPI = Multidimensional Energy Poverty Indexb. From grid, captive, mini-grid and stand-alone renewable energy plants, emission factor for Ghana is 0.6tons/MWh/yr1EmissionreductionprofileforGhana2013, (GhanaCO2gridemissionfactor is0.6CO2e/MWh)UNEP/RISOE).

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Project Baseline GWh

2020 GWh

Incremental GWh/yr

Capacity factor

MW equivalent

Investment USD

million

Average USD million per

MWre Mini-grids and stand-alone solar PV systems

18.0 36.8 54.7 18% 23.3 83.0 3.6

Solar PV based net metering with battery storage

2.4 39.4 41.8 18% 25.0 93.0 3.7

Utility-scale solar PV/wind power generation2

3.9 39.4 43.4 18% 25.0 50.0 2.0

total 24.3 115.63 139.9 18% 73.3 226.0 Average of 3.1

2VRA’s2.5MWsolarplantinNavrongoasbaseline.3DependingonwhenSREPIPimplementationcommences,thisfigureisboundtochange.Theanalysisisbasedontheassumptionthatatotalof73.3MWofpowerwouldhavebeenaddedby2020.However,ifthisisachievedearlierthentheavoidedCO2 will increase.

Parameters Emission factors Units

co2 avoided (Results Table) 76,664 ton/year

Ghana co2 emissions factor (grid) 0.6 ton/MWhco2 emissions factor (diesel off-grid) 0.8 ton/MWhIncremental Grid electricity (Results Table) 115.6 GWh/YrGrid co2 emissions avoided 47,256 tons co2

Inc. Off-grid electricity (Results Table) 76,664 GWh/YrOff-grid CO2 avoided 29,408 tons co2

total co2 avoided (calculated based on GWH from SreP Projects Results Table) 76,664 tons co2

Variance of co2 emissions avoided between results table co2 estimate and calculated from GWh estimate 0 tons co2

3. RESPONSIBILITIES AND M&E-RELATED TASKS During the SREP IP preparation, a quick assessment concluded that the existingsector-wideM&EsystemlackedthehumanandtechnicalcapacityforhandlingM&Eactivitieswithin theMinistry ofPower.

The MoP is responsible, through its Policy Planning, Budgeting, Monitoring andEvaluation(PPBME)Directorate,formonitoringtheactivitiescarriedoutinthesector.However,itwasmentionedthatfewstaffareworkinginthisareaandtheturn-overofstaffdoesnotallowforthebuildingofstrongercapacityovertime.Also,thereliabilityofdatacollectedinotherinstitutionsissometimesanissue,aswellasthetimelinessof

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datacirculation.WhileSREPcannotaddresssomeoftheseissues,theMoPiswillingtoexplorehowsometechnicalsupportcouldbeprovidedtoPPBMEinthecontextofSREP for strengthening the existing M&E system.

In termsof future institutionalarrangements for theSREPM&Esystem,anexistingM&Eofficer, seated in thePPBMEDirectoratewill have the responsibility tocollectand consolidate data from the SREP-funded projects to ensure consistency at theprogrammaticlevel,inlinewithCIFstandards.TheM&EofficerwillsupportandassisttheM&Eteamsofthethreeinvestmentprojectsin:(i)operatingtheirrespectiveM&Esystems;(ii)updatingthelogicalframeworkindicators;(iii)demonstratinghowoutputindicatorswill help achieveoverall SREPoutcomes inGhana; (iv) documenting thesocial,economic,genderandenvironmentalimpactsofSREPprogramactivities;and(v)preparingandsubmittingregularmonitoringreportstotheCIFadministrativeunit,in coordination with the MDBs.

4. STRENGTHENING KNOWLEDGE MANAGEMENT AND LESSONS SHARINGThe SREP National Task Force identified areas for strengthening knowledgemanagement and information and lessons sharing (ILS). The sections belowdescribethecomplementaryprogram-andproject-levelactivitiestargetedforSREPimplementation.

4.1. Program Level

Raising awareness among national and local stakeholders about Ghana’s energy-sectorchallengesandopportunitiesfordevelopingthepotentialofrenewableenergyisakeyelementof theSREP-Ghana IP.Theefficientmanagementof knowledge isneeded tomeasure theoutputsobtainedandsharewhathasbeen learnedwithallstakeholders,includingthoseatthenationalandlocallevels,inotherpilotcountries,and/or inothercountries in thesub-region.

TostrengthentheGhanaiangovernment’sknowledgemanagementandILScapacity,theSREPwillfundsomededicatedactivitieswhichwillbemanagedbytheMoP.ThecommunicationteamoftheMoPwillbemobilizedtocarryoutthefollowingactivitiesincoordinationwiththeRenewableEnergyDirectorate:

• Support the development and maintenance of an efficient internal energy-information system;

• Support the development of a dedicated on-line RE portal to improve theavailability of RE information for interested stakeholders;

• Promote efficient knowledge management and exchange of best practices(including gender mainstreaming efforts) between projects and with other

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African countries;

• RaisetheSREPprofileinordertoraiseadditionalfundsandfosterlarge-scalereplicationofactivitiescountrywideandinthesub-region;and

• Support themanagement of renewable energy knowledge (i.e. approaches,methods, and lessons) acquiredby theSREP.

Because knowledge management is closely linked to monitoring and reporting onprogramresultsandoutcomes,theILSandM&Eteamsshouldworkcloselytogether.

4.2. Project Level

Knowledgemanagement and capacity building activities will also be developed atthe project level. Based on specific capacity building activities identified during IPpreparation,MDBsandtheNTFhaveworkedtogethertoprepareatechnicalassistanceprojecttobesubmittedtotheSustainableEnergyFundforAfricaTrustFundmanagedbytheAfDB.ThisTAwillcomplementtheSREP-fundedactivities.Additionalcapacitybuildingactivitiesmaybeincludedintheinvestmentprojectsasneedbe.

TheILScomponentwillhelpdrawlessonsfromthenewbusinessmodelsandinnovativeactivitiestobeadoptedintheSREP-supportedpilotprojectssothatsimilarmodelsand activities can be replicated in other regions of Ghana and/or other countries.Lessonsfromprojectimplementationandgendermainstreamingwillhelp:determinekey factors that contributed to successor failure;quantify someof theco-benefitsof renewableenergydevelopment; and identifyareasof theproject implementationphasethatcouldbeimproved.

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RISK ASSESSMENT

Theoverall implementation riskof theSREP-Ghana IP is assessedasmoderate tohigh.

Table9belowpresentsthemainidentifiedrisksandmitigationmeasuresusedtoensuresuccessful implementation of the program. Appropriate corrective and supportivemeasureswillbeputinplaceduringtheimplementationoftheIPfollowingthelessonslearnedfromtheactivities.GuidancefrommembersoftheSREPSteeringCommitteewillalsobeactivelyandregularlysoughttoensurethatgoodpracticesareadopted.

Risk Type Description Mitigation measures Additional measures to which SREP may contribute

Residual risk

Technical

InsufficientREresource data

-Comprehensivewindand biomass resources assessments are ongoing. - Wind and solar data obtainable from Energy Commissionatverylowcost.

-UndertakeadditionalandmoresitespecificRETresource assessments and developcomprehensiveresource database which areaccessibletoinvestors/developers.-MakereliableRETdata/reportsavailabletodevelopersatvirtuallynocost.

Moderate

Limited capacityinappropriateselection of RE technology optionsandinefficientoperationandmaintenanceofcomplexREtechnology,machinery and equipment

Ministry of Power is supportingGhanaStandards Authority and the KNUST TEC Centre todevelopcapacitiesfor the authentication ofRETs,aswellaswith the Chinese Governmentprovidingtechnical assistance to selected Polytechnics andtechnical/vocationalinstitutions to build criticalmiddlelevelmanpowerfortheindustry.

Designandimplementrelevantrenewablespecificshort and long-term courses.

Low

Financial

Limitedriskmitigation instruments

The AfDB and WB are examiningtheoptionofprovidingPartialRiskGuarantees(PRGs)toprivateinvestorsinthepowersector.GoG has commenced issuanceofGovernmentConsentandSupportAgreement and discussions are underway with AfDB toprovidepartialriskinsurancetoREprojects.

Pilot-test and recommend themostappropriatePRGsandotherriskmitigationinstruments as well as bankablestandardmodelPPAforrenewableenergyprojectdevelopersinGhana.

Moderate

Financing RE

Attractingprivatesectorparticipationandfinancingbybundlingprocurementtobecost-effectiveandtime-saving.

-Supportneartermdevelopmentanddeploymentof light regulation aimed at small- and medium- scale renewableenergydevelopers.-Supportthefirstutility-scaleREprojectsinGhanawithconcessionalfinancingtolower the cost and therefore theperceivedriskofnon-paymentbytheutilitiesthatcurrentlyfacefinancialdifficulties.

High

table 9. MainRisksandProposedMitigationMeasures

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Risk Type Description Mitigation measures Additional measures to which SREP may contribute

Residual risk

Institutional

Difficultiesin enforcing approvedregulatory and legal frameworkscompoundedby absence ofaone-stopcentre

MoP and associated regulatory institutions reviewingtheoptionofdevelopinglightregulation,establishingafast-trackapprovalmechanism for renewable energy investments,andestablishingaone-stopRenewable Energy Authority.

-Supportneartermdevelopmentanddeploymentof light regulation aimed at small- and medium- scale renewableenergydevelopers-Providesupportforaproto-typeone-stopcentrefor renewables within the Directorate for Renewables thatcouldprovidetheembryonic model for the proposedRenewableEnergyAuthority.

Moderate

Poorfinancialstatus of the electricity sector in general

OngoingeffortsfromtheGoG to enforce technical andrevenueleakagereductionmechanisms/strategies.

ConsideraskingGoGtosetupareservefund(orsupporttheprovisionofPRGs)tocoverdefaultordelayedpaymentstoelectricitysuppliers.

High

Main utility off-takersmaynot be able to supporttheFiTpaymentsand re-imbursements to all the proposedutility-scale PV/windplantsandPVnet-meters,respectively

- The current FiT regime hasstipulatedcapsthat limit the amount of renewables that can be added to the national grid. -TheWB-financedEnergyDevelopmentandAccess Project in Ghana isworkingtoimprovetheoperationalefficiencyofthe electricity distribution system,whichisexpectedtoenhanceoff-takersabilitytosupportFiTpayments.

SREPfinancingmaybeused to blend concessional resources with commercial financingtoreducethetariffofutility-scalePV/windprojectstomoreaffordablelevels,thereby reducing the future burdenofREonfinanciallychallenged Ghanaian utilities.

High

Limited capacityoftheutilities,regulators andfinancialinstitutions andprojectdevelopersto structure and negotiate bankablePPAs

-MoPsupportingGhana Standards Authority and the KNUST TECCentretodevelopcapacitiesfortheauthentication of RETs. - MoP and the Chinese Governmentprovidingtechnical assistance to selected Polytechnics andtechnical/vocationalinstitutions to build criticalmiddlelevelmanpowerfortheindustry.

-Developtailoredcapacitybuildinginitiativesforutilities,financialinstitutionsandrenewableenergyprojectdevelopers.-Developabankablestandardmodel PPA for renewable energyprojectdevelopersinGhana.

High

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Risk Type Description Mitigation measures Additional measures to which SREP may contribute

Residual risk

SocialProjects haveunacceptablesocial impacts

Intensivestakeholderconsultations were carried out during SREP preparationandwillcontinuewhenprojectsareimplemented.

Aspecificproject-level,social-safeguardsassessment will be undertakenaccordingtotheESMF,andcompensationorothermitigation actions will be takeninaccordancewiththeframeworkandGoGand MDB guidelines.

Byprovidingaffordableelectricity to more people,theprogramwillpromotegreatereconomic growth and equity,includingtargetedinvestmentactivitiesin rural areas. A focus onproductiveenergyusesandemploymentcreation and gender mainstreaming is incorporatedintotheprogramdesignandwilltargetvulnerablegroups(womenandyouth).

Designoffinancialmechanisms under the SREPwilltakeaffordabilityandwillingnesstopayintoaccount,supportedbyinformation,education,andcommunicationcampaigns.Further elaboration on energy uses,employmentcreation,and targeting of women impactswillbeassessedduringappraisalofthefourproposedinvestmentsprojects.

Low

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ANNEX 1: DETAILED INVESTMENT BRIEFS

PROjECT 1: RENEWABLE ENERGY MINI-GRIDS AND STAND-ALONE SOLAR PV SYSTEMS

Background

About 20% of Ghana’s total population (representing 5 million people, based onthe2010GhanaStatisticalServicepopulationcensusreport)donothaveaccesstoelectricity,outofwhichabout2.9million reside in lakesideand islandcommunitiescreatedbytheAkosomboDam.Theseislandsandlakesidecommunitiesarethemostdifficult anduneconomical areas to electrify through thenational grid electrificationscheme.Thechallengesposedby theelectrificationof thesecommunitiesarenowseenasasignificanthurdleinthecountry’squesttoachieveuniversalelectrificationaccess(at least90%oftotalpopulation)by2020.(NB:TheGovernmentofGhana’stargethasbeennowmovedto2016.)

PreliminaryresultsandprojectionsofaMoPGeographical InformationSystem(GIS)studywithfundingsupportfromtheWorldBank(WB)determinedthedemandsandcategorizationofcommunitiesforoff-gridelectrification.Thedemandforthemini-gridsectorisabout350,000peoplein400communities,thereforeinvestmentrequirementsmust meet this need.33Theestimatedpopulationforstand-alonePVsystemstoreachthoseinsparselypopulatedcommunities is2.5millionpeople.

Current Efforts

Thereareanumberofongoingpilotmini-gridandstand-alonerenewableenergy(RE)electrification initiatives spearheaded by the GoG with support from developmentpartners, including the African Development Bank, State Secretariat for EconomicAffairs(SECO)ofSwitzerlandandtheWB.Amongtheseinitiativesarethefollowing:

Mini-grid

• FourpilothybridREmini-gridswithWBfunding.WhencompletedasplannedinSeptember2015,thepilotmini-gridswillserveanestimated10,000people.Theywillalsoprovideempiricaldatatofine-tunetheownership,management

33 ThefullGISsurveywillprovidefurtherdataandthesefigureswillbevalidatedtofinetunetheprojectionsforgenerationanddistributioninvestments.Itisestimatedthatthetotalcommunitiesneedingthemini-gridswillbeabouttwicethecommunitiescoveredbytheGISsurvey.Source:GEDAP/WB/GISAssessmentDatabase,2015.

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andoperationmodelsenvisaged.

• Ghana’sMinistry of Power (MoP) is in advanced-stage negotiations for thedesignandconstructionoftwohybridmini-gridstoserveabout2,000peoplein the Aflive and Azizakpe island communities in the Lower Volta estuariesthrough GoG funding.

• SECOhasprovided funding for theconstructionofanadditional (one)mini-gridon theLowerVoltaestuaries tocomplete theFour-IslandRing.

• TheGoGisbeingassistedthroughaWBfacilitytoestablishtheappropriateownership,operationsandmanagementofmini-gridmodelsandtorecommendthemostviableoptions.Thisworkisexpectedtobecompletedbythethirdquarterof2015.

Stand-alone systems

• Morethan38,000solarhomesystems(SHS)andlanternshavebeendeployedto date. The Lighting Africa34initiativeprovidedtechnicalsupporttoenhancethequalityoflanternsthatwerepromoted.

• EcobankandNationalInvestmentBank(NIB)aredevelopingREportfoliostolocallyfinanceREinvestments.TheARBApexBankimplementedaUSD10millionfacility,whichprovidedcreditanda50%capitalsubsidytoPVend-userconsumersandstimulatedthesaleof16,000SHSandlanternswithina3-yearperiod.

• TheGoGisredirectingthekerosenesubsidytofinancesolarlanterns,basedontherationalethatthesocio-economicandenvironmentalbenefitsassociatedwithsolarlanternsfaroutweighthebenefitsfromkerosenelanternsandthatthe kerosene subsidieswere not reachingmost of the intended rural targetgroups. A total of 75,000 portable lanterns have since been procured andnearly50,000distributed/soldthrougha70%subsidyscheme.Thetarget is2millionlanternsby2020andestablishmentofatleastoneprivate-sectorledsolar lanternassemblyplant inGhana.

• The GoG has developed a Community Lighting & Battery Charging FacilityProject (CL&BCP) to facilitate the sustainability of stand-alone systemsdeployed in ruralcommunities throughrevenuegeneration fromcommunity-owned battery charging stations. Under a Japan International CooperationAgency-sponsored project in 2010-11, twenty rural communities benefitedfromtheinstallationof20solarPVbatterychargingstations.Sincethen,onlyan additional 35 charging systemshave recently (2014-2015)been installedin35newruralcommunitiesunderGEDAP.Theslowscaling-upof thisself-sustainingmodel isdue todifficulty in raisingdonororGoG funding forREprojectsingeneral.Viewedastheflagshipprogramfortherenewableenergy

34AdditionalinformationonLightingAfrica,aninnovationoftheWorldBankGroup,maybefoundat:www.lightingafrica.org.17April2015.

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sector, SREP will therefore provide sustainable leveraging by attractingadditional funds for this initiative.

Key Challenges

Scarce financing for renewable energy. Compared to conventional grid-basedrural electrification programs that receive regular and consistent funding from theGoG,privatesectorandmultilateraldevelopmentpartners,whichresulted inGhanaregisteringoneof thehighest levelsofelectricityaccess insub-SaharanAfrica, therenewablestand-aloneandcurrently,mini-gridsub-sectorrelyonintermittentprojectfunding primarily sourced from development partners and NGOs.

High operation and maintenance costs.Althoughthereareunlimitedopportunities,Ghanahasnotregistereddesiredprogressindevelopingandexpandingitsrenewableenergy stand-alone market. Operation and maintenance—especially the cost ofreplacementofmajorcomponentssuchasbatteries—still remainamajorbarrier tostand-alone PV systems for households and SMEs.

Identifying private sector firms which prioritize RE. Although the recent WB-funded stand-alonesolarPVprojectexceededitssalestargets,itsprincipalbankingpartner,ARB-APEX Bank, has not shown interest to continue working in the sector oncetheproject iscompleteddue to internal restructuring. Instead,ARB-APEXBankwillconcentrateon its core roleofproviding funds to ruralbanksandsupervising theiractivities.However,giventheimmenseimpactoftheproject,someoftheARB-APEXBank partner rural credit institutions have expressed interest in maintaining andexpanding their solarPVbusinessportfolio. Therefore, thechallenge for the stand-alonesolarPVmarket is to identifyandcatalyzeprivatesectorfinancing fromfirmswishing tocontinuework in thesector.

Limited capacity in RE. Furthermore,experienceinmini-gridsremainslimitedasthecountry is yet to complete any of the ongoingpilot projects. The national uniform(poststamp)tariffpolicyhindersprivatesectorinvestmentinmini-gridelectrification.Inotherwords,mini-gridinvestmentunderthecurrentpolicyenvironmentisapubliclyfundedsocialinfrastructureinitiative.GenerationanddistributionmustbefundedbytheGovernmentwhereastheprivatesectorordesignatedbodysuchastheupcomingRenewable Energy Authority (RE Act 832) must participate in the operation andmaintenance of the infrastructure.

Objective

Theobjectivesofthisprojectareto:

1. Encouragesustainablepublicandprivatefinancingforscaling-uprenewableenergymini-gridsandstand-alonePVsystemstoachievetheGoGuniversalaccess goal by electrifying lakeside and island communities in Ghana,especially female headed households.

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2. Fine-tune and replicate the proven and innovative conventional ruralelectrification model for the mini-grid and WB/GEDAP/ARB Apex Bankcreditandpartialgrantsubsidymodel toprovidingelectricity todeprivedand marginalized off-grid communities.

3. Scale-upthepay-as-you-gomodelforthecommunityenergyservicecentrelighting component.

Project Components

Theprojectisstructuredaroundtwomaincomponents:

Public sector-led renewable energy-based mini-grid component:

• Procurementandinstallationof55mini-gridstoserviceatotalpopulationof137,500(26,442householdsincludingSMEs,publicfacilitiessuchasschools,clinics,communitywaterschemes,etc.,withanestimatedloadof16,500kW35 andatcostofUSD37million).

• Developmentofaframeworkfortheintegrationofmini-gridsintotheexistinggrid-connectedruralelectrificationmodel.

• Fine-tuningofproposedownership,operationandmanagementmodelsundertheongoing sevenpilot initiatives (4pilotswithGEDAP/WB funding, 1pilotwith SECO funding and 2 pilots with Korean funding) and adopt the mostsustainable and scalable model.

Private-public sector led stand-alone solar PV component:

• Installation of 20,500 stand-alone systems to meet desirable loads forhouseholdstoserveanestimated106,600peopleusingapartialsubsidyandcredit facility under the private sector-led initiative.

• Installationof1,350stand-alonesystemsforschoolstoservesome243,000students.36

• Installationof500stand-alonesystemsforhealthcentresand400stand-alonesystemsforcommunitiestoserviceanestimated215,000people.37

• Review of the proposedmodels to restructure the financing scheme of thestand-alone component.

• Zoningandprioritizingofcommunitiesforeffectiveandefficientdelivery.

35 Anestimated120Wperpersonbasedondatafromongoingmini-gridinitiativesandruralelectrificationstatisticsfromtheutilities(ECG/NEDCo).36Assumptionof180studentsperschool(leastoptionfromGhanaEducationService,numberofstudentsbenefitingcouldincreasesignificantlytoabout45%more).37Onaverage (usingGEDAPdata,eachhealth facilityservicesabout350peopleand thecommunitylightingandenergyservicecentrebenefitsabout100peoplepersystem (asystem iscomprisedofadesirable energy service centre and 4-10 solar streetlights for public lighting).

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Rationale for SREP Financing

Increased access to electricity and improved reliability of power supply that resultfrom sustainable new mini-grids and the solar-PV stand-alone systems is essential to bridgethesocioeconomicdisparitiesbetweenGhana’surbanandruralpopulation.Tosustainreliablepowersupplytodeprivedruralcommunities,investmentsmustremainfinanciallyviableafterprojectcompletion.Toenablethedevelopmentofmini-grids,theSREPwilladoptaninnovativemechanismtoprovidecapitalsubsidiesandlong-termconcessional facilitiesmodeled along the conventional rural electrification scheme.Tariffswillallowtheoperators(community,privatesectorandtheGhanaRenewableEnergyAuthority)tofullyrecoveroperationandmaintenancecostsoftheinvestmentto ensure long-term sustainability.

Furthermore,theSREP-GhanaIPwillworktoremovekeybarrierstoprovidingsolar-based stand-alone electricity to rural areas, including those related to: technicalproblems; consumer perception and awareness of the advantages of the systems;andavailablefinancingtomakethesesystemsaffordableforlow-incomeconsumers.SREPwill fine-tune the Bank/GEDAPARBApex Bankmodel for stand-alone solarsystems, to bring on board a wider range of financing institutions (i.e. committedindividualruralbanks,orthoseworkinginmicrofinance),privatesectorpartners,MDBsand community-based institutions (NGOs and civil society organizations) to ensuresustainable scale-up under SREP.

To provide long-term consumer loan financing for the stand-alone component, alineofcreditwillbecreatedandoperatedasarevolvingfundforon-lendtocredibleprivatesectorandcommunity-basedmicrofinancefirms.Thestructurewillbedetailedout to ensure that the participating financing partners are able to refinance loanswith reasonable terms of repayment over initial investment andmajor componentsreplacement. Also, SREPwill provide partial grants to customers or consumers tomake stand-alone SPV systems affordable and create criticalmass demand as anincentivetoserviceprovidersandsuppliersoperating intheseremoteandrelativelymarginalized areas.

Finally,SREPwillmobilizeadditionalconcessionalfinancingduringimplementationforboth the renewablemini-gridandstand-alonecomponents fromotherdevelopmentpartnersandserveasthemainflagshipprogramforthesectorwithwhichallpartnersmustwork.

Result Indicators

Keyresultsindicatorsforthisprojectinclude:

• Studyonintegrationsofmini-gridscompleted

• 55mini-gridsinstalled

• Studyonfinancialinstitutionscompleted

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• 20,500stand-alonesystemsforhouseholdsinstalled

• 1,350stand-alonesystemsforschoolsinstalled

• 500stand-alonesystemsforhealthcentresinstalled

• 400stand-alonesystemsforcommunitiesinstalled

Theprojectwillresultinthefollowingoutcomes:(i)theallocationofdedicatedbudgetarysupportforrenewablemini-gridelectrificationincludingsubsidiesandaspectsoftheEnergyFundtomini-gridandstand-aloneSPVdeployment;(ii)twoormorecommittedlocalfinancialinstitutionswithactiveportfoliosinGhana’sstand-alonePVmarket;(iii)scaling-upofthesuccessfulprivatesector-ledstand-alonePVdeploymentapproachesaswellaspublic-financedrenewables-basedmini-grids;(iv)theconnectionof244,100peopleandimprovedhealth,education,andenergyservicedeliverytoabout458,000peopleinthenext3-5years;and(iv)improvedenergyaccesstoremotecommunities,themostvulnerableofwhichincludefemaleheadedhouseholds.

Financing Plan

Thefinancingwillcovera lineofcredit facility foron-lending toconsumers throughparticipatingfinancialinstitutionsaswellasgrantelementstoprovidepartialsubsidiesto consumers tomake solar home systems (SHS) affordable and ensure adequatedemandasanincentivetosupplierstomoveintoremote,relativelypoorareas.TheMoPwillmanage thegrants throughselected localfinancing institutions,whichwillprovideupto40%ofthefullcostofthestand-aloneSPVincludingsupply,installationand commissioning.

ThetotalestimatedprojectcostisaboutUSD83million,ofwhichUSD17.5millionissoughtfromtheSREP,USD27millionfromtheAfDB,andUSD12millionfromotherdevelopment partners. The private sector, through commercial banks, will financeaboutUSD18.5million,whiletheGoGwillprovideUSD8million.

Indicative Budget SREP GoG AFDB IFC DPs Private Sector Total

Investment 15.0 6.0 27.0 0.0 12.0 18.5 78.5

technical Assistance 1.0 0.5 0.0 0.0 0.0 0.0 1.5

Implementation Support 1.5 1.5 0.0 0.0 0.0 0.0 3.0

total 17.5 8.0 27.0 0.0 12.0 18.5 83.0

Lead Implementing Agencies

TheAfDBwillbetheleadMDBfortheimplementationofthisproject.TheRenewable&AlternativeEnergiesDirectorate(RAED)oftheMoPwillbetheimplementingagencyon behalf of the GoG.

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Tentative Project Preparation Timetable

It is expected that the projectwill be presented to theAfDBBoard for approval inJanuary2017.SubmissiontotheSREPSubcommitteefortheirnoobjectionisexpectedaroundNovember2016.

Project Preparation Grant

TheGoGisrequestingapreparatorygrantofUSD899,800topreparetheproject(seePPGbelow).

SCALING-UP RENEWABLE ENERGY PROGRAM IN LOW INCOME COUNTRIESPROJECT PREPARATION GRANT REQUEST

1. country: Ghana 2.CIFProjectID#: [Trustee to assign ID]

3. Project Title: RE-BasedMini-gridandStandaloneElectrificationProject4. tentative SreP Funding Request (in USD million total) for Project at the time of Investment Plan submission:

SREP Component: USD17.5million

5. Preparation Grant request (in USD): USD899,800 MDB: AfDB

6. National Project Focal Point: SethA.Mahu/MinistryofPowersmagbeve@yahoo.com,smahu@energymin.gov.gh

7. executing Agency: Ministry of Power8. MDB SreP Focal Point and Project / Program Task Team Leader (TTL):

MDB HQ Focal Point: JoaoCunha, SREP Coordinator,j.cunha@afdb.org

TTL: Thierno Bah t.h.bah@afdb.org

9. Description of Activities Covered by the Preparation GrantTheobjectiveoftheproposedProjectPreparationGrantistoensurethatGhanadevelopssufficientin-house capacity to complete the project design and bidding documents, launch request forproposals, review, select and negotiate contracts for renewable energy-based mini-grids andstandalone activities in the country.The preparatory activities include, among others, the following: (i) set up project implementationunit and related structures for the program; (ii) analyze theGIS data and select candidate sites;(iii) undertake social economic surveys of selected island and lakeside communities; (iv) prepareenvironmental&social impactassessments; (v)developtemplates forRequest forProposalsandrequiredtenderdocuments;(vi)organizeatechnicalworkshopfornationalexpertsoncompetitivetendering for the selection of bidders. 10. outputsDeliverable timelinePIU and related structures established March2017GISdocumentreviewedandcandidatesitesselected June2017Relevanttemplatesandtenderdocumentsdeveloped September2017Socialeconomicstudiesforthesitesconducted(consultant) March2018Environmentalsocialimpactassessmentconducted(consultant) March2018Expertstechnicalworkshopundertaken April2018Procurementofallmajorprojectactivitiescompleted July2018

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11. Budgetexpenditures Amounts (in USD)Consultants(socioeconomicandESIAstudies) 450,000.00Fieldactivitiesandsensitizationofcommunities 135,000.00Workshop 28,000.00Travel/Transportation 55,000.00Others(PIU,AdministrativeCosts,etc.) 150,000.00Contingencies(10%) 81,800.00Total Cost [899,800.00]OtherContributions:GovernmentofGhana USD 200,000 (salaries,

workshops, etc.)12. TimeframeIt isexpected that theprojectwillbepresented to theAfDBBoard forapproval inJanuary2017.SubmissiontotheSREPSubcommitteefortheirnoobjectionisexpectedaroundNovember2016.13. Other Partners Involved in Project Design and ImplementationWorldBank,StateSecretariatforEconomicAffairs(SECO),GEF14. If applicable, explanation for why the grant is MDB executedNotapplicable.15. Implementation ArrangementsTheProcurement andFiduciary function associatedwith the envisagedactivitieswill be ensuredby theRenewableandAlternativeEnergyDirectorate (RAED)at theMinistryofPower.TheRAEDhasbeenimplementingmulti-donorfundedprojects,suchasWB/IDA/GEF,Spanish,JapaneseandChinesegovernment-fundedREprojects,inadditiontotheongoingfourpilotmini-grids.TheRAEDhasthereforedemonstrateditscapabilitytostructureandimplementREprojectsandwouldleveragetheexperiencegainedtofacilitatethespeedyandefficientimplementationoftheprojectsunderitsresponsibility. TheRAED is currently implementing the renewable energy component of theUSD210millionmulti-donorfundedGhanaEnergyDevelopmentAccessProjectI&IIwhichincludestheongoingmini-gridsandoff-gridaccessinpublicinstitutions.AfDBhasafieldofficebased inAccra thatshallprovide theneededsupportwith regards to theimplementationof thePPGgrant as needbe.

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PROjECT 2: SOLAR PV BASED NET METERING WITH BATTERY STORAGE

Background

TheGoG’spolicyandstrategytomeetthehighaverageelectricitydemandgrowthrateof11%istoexploitalltheopportunitiesofpowergenerationavailabletothecountry.Thisincludestheuseofconventionalandnon-conventionalpowergenerationsystemssuch as renewable energy net metering technology.

Giventhehighelectricitydemand,theGoGisunabletocopewiththemagnitudeofinvestmentrequiredwithoutadditionalsupport.KeytotheGovernment’sstrategy isthecreationofanenablingenvironmenttoencourageprivatesectorparticipation.Todatehowever,thishasyettoyieldtheanticipatedresultsastheexpectedinvestmentsfromIPPshavenotbeenforthcoming.

Furthermore,theenergysectorcontinuestoexperienceelectricitysupplychallengesduetopoorrainfallpatternsresultinginlowwaterlevelsinGhana’sthreehydroelectricpowerstations,coupledwithanerraticsupplyofnaturalgas fromtheWestAfricanGasPipelinetopowerthermalplants.Asaresult,considerablestrainhasbeenfeltonthecountry’spowersystem,specificallyongeneration,whichovertheyearshasnotbeen able to adequately match the demand.

This situation has resulted in frequent load shedding with its attendant socioeconomic impacts on industries and commercial businesses, particularly SMEs and essentialpublic services (hospitals, schools, etc.).Meanwhile, backup power solutions haveincreased indemand inorder tokeepbusinessesrunningandthe influxanduseofsmalltomedium-sizepetrol/dieselgensetshasalmosttripledoverthelastfewyears.Most of these gensets however, are inefficient and pose severe environmental andhealth challenges and further harbour associated social and economic consequences.

To help address these challenges, the viability of clean, reliable and cost effectivepowersolutionsinlinewiththeGovernment’senergypolicyneedstobedemonstrated.Inthisregard,renewableenergy-baseddistributedgenerationhasbeenidentifiedasoneofthesolutionstowhichtheprivatesectormayplayacentralrole.Net-meteredsolarPVsystemswithbackupstorageprovidethepossibilityforbusinessestoself-generateandcontinueoperatingduringpoweroutages.Theexcesspowercanthenbeexportedtothegridunderapowerexchangescheme,whichwillrelievethegridandreduce the electricity bills of net-metered consumers.

Current Efforts

In 2010, theGoG, through theEnergyCommission, initiatedapilot grid-connectedsolarPVproject.Theaimofthepilotwastohelpdeterminethetechnicalandeconomicviability of small-scale grid connected solar PV systems and provide lessons for a

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largerscaledeployment.Thepilotalsohelpedpromotethedeploymentanduseofsmall-scalegrid-connectedrenewableenergysolutionsacrosskeysectorstoaugmentconsumptionfromthenationalgridandhelpkeeptariffswithinmanageablelevels.

TheEnergyFundprovideduptoa40%matchinggrantonthehardwarecosttosupportthe installationofthesolarPVsystemsuponasuccessfulcompletionof installationworks.Outofatotalof39individualandinstitutionalapplicationsreceivedasshowninthetablebelow,only16withtotal installedcapacityof120kWpactually receivedfinancialsupportduetolimitedfunding(inabilityofsomeapplicantstoraisecounterpartfunding)andtechnicalconstraints.

CATEGORIES PHASE 1 PHASE 2 PHASE 3 TOTAL SHARE OF APPSHouseholds 2 9 0 11 28.20%Clinic/Hospital 0 2 0 2 5.13%Agro Processing Companies 1 2 4 7 17.95%

Hotels 0 0 2 2 5.13%Real Estate 0 2 0 2 5.13%Educational Institutes 2 2 0 4 10.26%

Offices 0 4 3 7 17.94%RET Installers 0 1 3 4 10.26%Total 5 22 12 39 100.00%

Apartfromhouseholdsexpressinginterest,therewashighlevelofinterestfromSMEsandbusinesses.Onthewhole,thesizesofthesolarPVsysteminstalledrangedfrom0.8kWp to 42.77kWp, with an average of 7kWp. Analysis showed that an averagesystemsizefortheresidential,educational/healthinstitutionsandsmall/mediumscalebusinesseswereabout4kWp,10kWpand20kWp,respectively.

Lessons learned during the pilot.Thedistributionutilities’policyofreplacingpostpaidmeterswithprepaidones—bothtoreducethecommerciallossesandimproverevenuecollection—had an adverse impact on the pilot netmetering project since prepaidmeters are incapable ofmeasuring the net consumption of power (import/export).Thismadeitdifficultforthecustomertoappreciatethebenefitsoftheinvestmentandthereforeaffectedthescaling-upoftheproject.

Inresponsetothatchallenge,theutilities,incollaborationwiththeregulators,procured350bi-directionalmeterstobetestedattheexistingandfutureinstallationsbytheendof2015.Goingforward,therewillbeaneedtoensureeffectivestakeholderconsultationand collaboration with all parties involved (utilities, regulators, consumers, etc.) toensureasustainablescaling-upofnetmetering.

Anotherrationalforcustomersoptingfornetmeteringistoprovideback-uppowerintheeventofgridfailure.However,thepilotnetmeteringsystemdidnothavestoragecapacitydue to theadditional cost to thecustomers.Asa result, customerscouldnotappreciatethebenefitsduringpoweroutages.Goingforward,thereisaneedtointegrate battery storage to solar PV net metering systems to meet desirable load in

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theeventofpoweroutage.

Theover-archinglessonwhichthereforeemergedfromthepilotwas:themoreapparentthe benefits of the project (e.g., watching net consumption decrease and enjoyingback-uppower),thegreaterconsumerbuy-in.

ThePresidentofGhana,inhisStateoftheNationaddressinFebruary2015,announceda 200,000 rooftop solar PV program as ameasure to save the country about 200MWofpowerandsustainsmallbusinessesandhouseholdsinthewakeofincreasingelectricitytariffs.ThisrooftopsolarPVprogramisoff-grid,unlikethenet-meteredsolarPV system project which is grid connectedwith backup. The indicated sources offinancingforthePresident’sinitiativeincludeanadjustmentoftheEnergyFunLevyonPetroleumProductsfromGHp0.05toGHp1.0perliter,partofwhichwouldbeusedtoestablishtheRenewableEnergyFund(REF)andanancillaryservicechargeofGHp1.0perkWhofelectricitytransmitted.

Otherintitiativesinclude:

• The715kWpsolarPVnet-meteredinstallationattheNoguchiMemorialInstituteforMedicalResearchoftheUniversityofGhanawithfundingsupportfromtheJapaneseGovernment.

• Anadditional25grid-tiedPVhavingatotalcapacityof7MWwereinstalledattheendof2014throughprivatesectorinitiatives.

• ThelaunchoftheGhanaRenewableEnergyFairtopromotetherapidutilizationofrenewableenergyresourcesinthecountry,especiallythroughnetmetering.

• Thedevelopmentofanetmeteringcodewith technicalassistance from theGerman Government.

• Introductionofkeyincentivessuchasanimportdutywaiverforsolarsystems(e.g.,modules,batteries,andotheraccessoriesdeliveredassystems).

Key Challenges

AlthoughinterestinsolarPVnetmeteringishigh,thehighupfrontcostsofUSD2,50038 perkWpandtheperceivedhighriskoffinancingrenewableenergyprojectsposeamajorsetbackforscaling-up.Additionaly,thestorageoptionincreasestheinvestmentcostby25%to30%.

Objective

Theobjectivesoftheprojectareto:

• Developacomprehensivenetmeteringprogramandthedeploymentofatleast15,000unitsofroof-mountedsolarPVsystemstoreducetheeconomiccostofpoweronSMEsandhouseholds,and

38 This includes the cost of the bi-directional meter.

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• IncreaseREcontributionsintheelectricitygenerationmixby25-30MW.Project Components

Thenetmeteringprojectwillhavethefollowingcomponents:

Investment

• Deploy15,000gridconnectedsolarPVsystemsequippedwithback-upstoragecapacitytomeetdesirableloadsintheeventofpoweroutageanddeterminetheoptimumfinanciallyviableback-upstoragecapacity.

Technical Assistance • Developacreditrecoveryfacilitythatuseselectricitybillingsystemsandlocal

bankinginstitutionstofinancethehighup-frontcostofnet-meteredPVwithstorage systems.

• Developastandardcontractbetweentheutilityandthenet-meteredcustomersanddecentralizedapplicationprocessregime.

• Studytheimpactofalargenumberofdistributedgeneratorsonthevoltage,frequencyandharmonicsofthedistributionnetworksandestablishappropriatestrategiesfortheimplementationoftheambitioustarget.

• Developaserviceprovidercertification regimeandsupport the trainingofasignificantnumberofGhanaianrenewableenergyserviceproviders/expertsinlinewithsectorlocalcontentandparticipationrequirement.

• CapacitybuildingofrelevantstakeholdersofthenetmeteringprojecttargetingkeystakeholderssuchasGRIDCo,ECG,NEDCo,MoP,EC,PURC,solarPVserviceproviders,beneficiariesandbanks.

Implementation Support

• Providesupportfortheoperationalandmanagementcostoftheimplementationteam.

Rationale for SREP Financing

Consideringthehighupfrontcostandtheperceivedhighriskoffinancingrenewableenergy projects, concessional financing from SREP will help reduce the upfrontinvestmentcostofnetmeteringwithbatterystorageandboostdemandandcustomerconfidence.

Sincethecompletionofthepilotgrid-connectedsolarPVproject,additionalfundingtoscale-uptheprojectcouldnotbesecuredtodate.SREPwillleveragetherequiredfinancingandprovidetheappropriateframeworktoscale-upthepilotgridconnectedproject.TheexperienceinGhanacouldthenbereplicatedintheECOWASsub-regionandcreateneweconomicopportunitiesfortherenewableenergyindustry.

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Results Indicators

Keyresultsindicatorsforthisprojectinclude:

• 15,000SMEs,publicinstitutions(includingeducationalandhealthinstitutions)and to a limited extent, households, would benefit from clean and reliablesupplyofelectricityresultingin25-30MWnewcapacitytothetotalinstalledcapacity.

• Improved technical and financial framework and institutional and humancapacity for the sustainable scaling-up of net metering in Ghana.

• Improved power quality (voltage, frequency and harmonics)within the localnetwork.

Financing Plan

ThetotalestimatedprojectcostisaboutUSD93million,ofwhichUSD12.5millionissoughtfromtheSREP,USD15millionfromtheAfDB,andUSD12millionfromotherdevelopmentpartners.TheprivatesectorwillfinanceaboutUSD45.5millionthroughcommercialbanks,whiletheGoGwillprovideUSD8million.

Indicative Budget SREP GoG AFDB IFC DPs Private Sector Total

Investment 10.5 6.5 13.0 0.0 7.0 45.5 82.5

technical Assistance 1.0 0.0 2.0 0.0 5.0 0.0 8.0

Implementation Support 1.0 1.5 0.0 0.0 0.0 0.0 2.5

total 12.5 8.0 15.0 0.0 12.0 45.5 93.0

Lead Implementing Agencies

The AfDBwill be the leadMDB for the implementation of this project. The EnergyCommission will be the implementing agency on behalf of the GoG.

LocalfinancinginstitutionsincludingtheNationalInvestmentBank,Ecobank,Fidelity,UniBank,etc.haveshownstronginteresttoparticipateintheprojectimplementationgiven they have also been adversely impacted by the power crisis. The twomaindistribution utilities—Electricity Company of Ghana (ECG) and Northern ElectricityDistribution Company—have shown strong interest to support the implementationbecauseofitspotentialbenefits.TheyarealsorepresentedontheSREPIPNationalTaskForceandhaveactivelyparticipatedinthedeliberationsandthedevelopmentofthisprojectconcept.ECGhascurrentlypurchased300reversiblemeterstokick-startthenationwide implementationof thenetmeteringscheme.

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Tentative Project Preparation Timetable

It is expected that the projectwill be presented to theAfDBBoard for approval inJanuary2017.SubmissiontotheSREPSubcommitteefortheirnoobjectionisexpectedaroundNovember2016.

Project Preparation Grant

TheGovernmentofGhanaisrequestingapreparatorygrantofUSD610,500topreparethisproject(seePPGtablebelow).

SCALING-UP RENEWABLE ENERGY PROGRAM IN LOW INCOME COUNTRIESPROJECT PREPARATION GRANT REQUEST

1. country:Ghana 2.CIFProjectID#: [Trustee to

assign ID]3. Project Title: Net Metered Solar PV For SMES and Lighting Project

4. tentative SreP Funding Request (in USD million total) for Project at the time of Investment Plan submission:

SREP Component: USD12.5million

5. Preparation Grant request (in USD):

USD610,500 MDB: AfDB

6. National Project Focal Point: SethA.Mahu/MinistryofPowersmagbeve@yahoo.com,smahu@energymin.gov.gh

7. executing Agency: Ministry of Power

8. MDB SreP Focal Point and Project / Program Task Team Leader (TTL):

MDB HQ Focal Point: JoaoCunha, SREP Coordinator,j.cunha@afdb.org

TTL: Thierno Bah t.h.bah@afdb.org

9. Description of Activities Covered by the Preparation GrantThe objective of the proposed Project PreparationGrant is to undertake the project preparationactivities that lead to thedevelopmentofacomprehensivenetmeteringprogramme,deploymentofatleast15,000unitsofroof-mountedsolarPVsystemstoreducetheeconomiccostofpoweronSMEsandhouseholdsandasaresultadd25-30MWofcapacitytothegenerationmix.Thefollowingpreparatoryactivitieswillbecarriedout:(i)reviewthenet-meteringregulatoryframeworkincludingthecode;(ii)developandestablishtheprojectimplementationarrangements;(iii)developthefinancingframeworkincludingthecreditrecoveryfacility;(iv)identifycrediblefinancinginstitutionsandestablishnecessaryagreementsthatensureactiveparticipationofthesefinancinginstitutions;(v)conducttheimpactoflargethenet-meteringonthedistributionsystems;(vi)developthenecessarytemplatesforserviceconnection,capacitybuildingawarenesscreation;(vii)developthemarketingsystems; (viii) develop templates for request for applicationsand required tenderdocuments; (ix)provideatechnicalworkshoptokeystakeholders;(x)conductprocurementactivities.10. outputsDeliverable timelineNet-meteringframeworksreviewedandrecommendationsmade April2017Financinginstitutionsidentifiedandcontractsestablished June2017Implementationarrangementsdevelopedandestablished July2017Net-meteringimpactondistributionnetworksconducted(consultant) March2018

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Serviceconnectiontrainingconductedandtemplatesdeveloped(consultant) January2018

Expertstechnicalworkshopundertaken April2018Procurementofallmajorprojectactivitiescompleted July201811. Budgetexpenditures Amounts (in USD)Consultants(net-meteringimpactandserviceconnectionstudiesandtemplates)

355,000.00

Workshop 30,000.00Travel/Transportation 20,000.00Others(PIU,AdministrativeCosts,etc.) 150,000.00Contingencies(10%) 55,500.00

Total Cost [610,500.00]OtherContributions:GovernmentofGhana USD250,000

(salaries,workshops,etc.)

12. TimeframeIt isexpected that theprojectwillbepresented to theAfDBBoard forapproval inJanuary2017.SubmissiontotheSREPSubcommitteefortheirnoobjectionisexpectedaroundNovember2016.13. Other Partners Involved in Project Design and ImplementationUNDP,GIZ14. If applicable, explanation for why the grant is MDB executedNotapplicable.15. Implementation ArrangementsTheProcurementandFiduciaryfunctionassociatedwiththeenvisagedactivitieswillbeensuredbytheEnergyComission.TheEnergyCommissionhasovertheyears,implementedkeyflagshipprogramsonbehalfoftheGoGincludingthecontinent’smostsuccessfullightingretrofittingprogram,whichsavesGhanaover120MWofpowergenerationinvestmentsandC02emissionsofabout112,320tonsperyear.TheCommissionsuccessfullypilotedtheREnetmeteringinitiativeandhasdevelopedkey policy instruments and technical guidelines for the renewable energy industry. Recently, theECpiloted theUNDPfunded“PromotingofApplianceofEnergyEfficiencyandTransformationofthe Refrigerating AppliancesMarket in Ghana” project with the objective to improve the energyefficiencyofappliancesmarketedandusedinGhanathroughtheintroductionofacombinationofregulatory tools such asMinimumEnergy Performance Standards and Information Labels (S&L).TheEnergyCommissionisfinallyimplementingtheWindResourceAssessmentcomponentoftheGEDAPprojectandtheSE4ALLInitiative.AfDBhasafieldofficebased inAccra thatshallprovide theneededsupportwith regards to theimplementation of the PPG grant.

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PROjECT 3: UTILITY-SCALE SOLAR PV/WIND POWER GENERATION

Background

InOctober2014,theGoGannouncedarevisedFiTforutility-scalesolarPVandwindthathasmadeinvestmentinthesetechnologiesamoreattractiveproposition.Thereisapipelineof31utility-scalesolarPVandwindinvestmentsthatareatvariousstagesofdevelopment(seethetablebelow)withatotalenvisagedinstalledcapacityof1,835MW.

Utility-scale Solar PV and Wind Projects

Projects with valid prov. licenses

Projects with siting permits

Projects with construction permits Total

No. of Projects 15 15 1 31Capacity (MW) 377 1,438 20 1,835

However,thenewRenewableEnergyTariffs(indicatedinTable3)havesomeelementsthat are currently hindering the full development of the utility-scale solar andwindsub-sectors.TheFiTareofferedforamaximum10yearPPA,whichisconsideredtooshort a period to attract the long-tenor private financing necessary tomake utility-scaleprojectscost-effectiveandfinanciallysustainable.Moreover,thenewFiTlimitstheutilitysolarPVcapacitywithoutgridstabilityorstoragesystemto150MWasperthe Energy Commission’s guidelines on integration of utility-scale solar PV systems intothenationalelectricitydistributionandtransmissionsystems(eachindividualplantshouldnotexceed10MWand20MWifinterconnectedatdistributionandtransmissionvoltages,respectively)39.Windcapacityisalsolimitedtoamaximumof300MW.

While the potential returnson investment inutility-scalePVhasstimulated interestfromanumberofdevelopers(asmallnumberoffirmshaveinvestedlimitedamountsintheearlydevelopmentofREprojects)todate,nowindprojecthasreachedfinancialclose or started construction, and only one corporate-financed solar PV project isunderway. Private sector solar PV and wind investments still face a number ofinterrelatedbarriers, including: (i) lack of long-term financing; (ii) limited experienceandtrackrecordofREprojectdevelopmentbylocalsponsors;andmostcritically(iii)perceptionofpaymentriskrelatedtothenewlygazettedtariffsorFiTs.ThesebarriersareexacerbatedbythefactthatREprojects inGhanasuffersomediseconomiesofscaleandhigherdevelopmentcosts.WhileFiTssignificantlyaffecttheprofitabilityofREprojectsandinfluencetheirabilitytoattractfinancing,thesectorrequiresadditionalsupport to catalyze first project-financed solarPVandwindplantsdue to thehighperceivedriskofalargelyuntestednewFiTregime.

39 PURC. Publication of Feed-in Tariffs and Capacity Cap for Electricity Generated From RenewableEnergy Sources (1 October 2014).

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In addition, Ghana has not yet institutionalized a systematic and competitive setofbenchmarks thatwouldallow for theprioritizationof themostdeservingPVandwinddevelopersunderthesetlimitedcapacity.Furthermore,theroadmapforfutureexpansionofthesolarandwindutility-scalesub-sectors,beyondthecurrentcaps,isstill unclear.

Ghana’stransmissionanddistributionnetworksarenotrobustenoughtoaccommodatealltheproposedutility-scaleplants.Inaddition,thebalancesheetsofmainutilityoff-takersmaynotbeabletosupporttheFiTpaymentstoalltheproposedplants.Indeed,many investors have expressed concerns over FiT payment risk, since there is nooperational experience thus far with this regulatory regime, while the principal off-takersareunderfinancialstress.

Objective

TheobjectiveofthisprojectistoassisttheGoGovercomekeybarriersthatpreventthegrowthandexpansionoftheutility-scalesolarPVandwindmarketinGhanaby:catalyzingthefirstprojectfinancedutility-scaleREplants;demonstratingtheGhanaianREsectorpotentialtofinanciers;andhelpingattractfurtherinvestmentinthefuture.It would also bring into sharper focus themost important barriers that need to beovercometoensureamorerapidgrowthofGhana’sutility-scaleREsector.

Project Components

Thisprojectinvolvesthestructuring,financingandconstructionofsolarPV/windpowerplantsbyprivateinvestors.

Rationale for SREP Financing

SREP financing could help the early projectsmitigate some of the perceived risksassociatedwithfirst-moverprojects,suchasFiTpaymentriskandtherelativelyshortvalidityofFiTs(10years).Theserisksarehavinganadverseimpactonprivateinvestors’confidencetofinanceutility-scalewindandsolarPVinGhana,whichcouldpotentiallydelaythedevelopmentoftheentiresub-sector.SincethefirstFiTswereintroducedon1September2013,therehasbeenonlyoneprojectdevelopercurrentlyatconstructionstage.ConcessionalfinancingfromSREPwillenabledeveloperstonegotiatelongerPPAsatlowertariffsthatwouldbemorecommensuratewithutilities’abilitytopayandtherebyreduceoneofthekeyprojectrisks.

Moreover, successful financial closureanddevelopmentof thefirst fewutility-scaleRE projects with support from the SREP should demonstrate the viability of REtechnologiesinthecountryaswellasthesoundnessoftheregulatoryregimetosupportthem.Whileachangeintheregulatoryframeworkmaybenecessaryinthemedium-tolong-terminordertofurtherenhancetheREFITmechanism,thisisalengthyand

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cumbersomeprocessthatrequirescarefulstudyandsomeinitialexperiencewiththeexistingmechanism.TheobjectiveofthisprojectistosupportthedevelopmentofthefirstREprojectsundertheexistingregulatoryframeworkinordertodemonstratebothitsstrengthsandweaknesses.Itsweaknessescanthenbeunderstoodinmoredetailandinthecontextofrealexperience,whichwillenablemoreinformedandeffectiveenhancementoftheregulatoryframework.

ConcessionalfinancingfromSREPcanalsohelpmitigatetheperceivedinvestorriskofweakoff-takersbyhelpingtobringREprojecttariffsdowntomoreaffordablelevels,therebyreducingthefutureburdenofREonfinanciallychallengedGhanaianutilities.Bycatalyzingthefirstutility-scaleREprojectsinGhana,SREPwillalsohelptheGoGcarefullyassessthegridimpactofutility-scaleREandmakemoreinformedplanningdecisionsforscaling-upREinthefuture.

SREP support is also expected to pave the way for the leveraging of substantialfinancingfromtheprivatesector forutility-scalewindandsolarPVdevelopmentbyhelpingthefirstprojectsobtainappropriate long-termfinancing.This isexpectedtostimulatethegrowthofanascentlocalREprojectdevelopercommunity.Successfulscale-up of a large-scale wind and solar PV sector in Ghanawould generate jobsduringtheconstruction,operationandmaintenancestages,helpingtoalsobuildlocalRE capacity.

Result Indicators

Byproviding utility-scale power supply, the projectwill benefit the entireGhanaianpopulation that has access to the national grid, thus it will indirectly contribute tomeetingthecountry’slong-termgoals.Theprimaryresultoftheprojectwillbemeasuredintermsofadditionalutility-scaleREcapacityaddedtotheGhanaiangridbyprivatesectoroperators.Privatesectorinvestmentwillalsobemeasured.

Financing Plan

ThetotalestimatedprojectcostisaboutUSD50million,ofwhichUSD10millionissought from theSREP,USD10million from IFCandUSD10million from theAfDB(privatesectorwindow).Theprivate-sectorlendingwillamounttoaboutUSD20million.

Indicative Budget SREP GoG AFDB IFC DPs Private Sector Total

Investment 10.0 0.0 10.0 10.0 0.0 20.0 50.0

technical Assistance 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Implementation Support 0.0 0.0 0.0 0.0 0.0 0.0 0.0

total 10.0 0.0 10.0 10.0 0.0 20.0 50.0

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Lead Implementing Agencies

TheIFCwillbetheleadMDBfortheimplementationofthisprojectinvestinginprivatesectorcompanies.

Tentative Project Preparation Timetable

IFCwillconductaninitialmarketassessmentfollowingapprovaloftheSREP-GhanaIP.Dependingonmarketconditionsandappraisals,itisexpectedthattheprojectwillbesubmittedtotheSREPSub-Committeeforapprovalinthefirstquarterof2016andpresentedtotheIFCBoardforapprovalinthethirdquarterofyear2017.

Project Preparation Grant

TheGovernmentofGhanaisnotrequestingaPPGforthisproject.

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PROjECT 4: TECHNICAL ASSISTANCE TO SCALE-UP RENEWABLE ENERGY IN GHANA

Background

TheGoGhasestablishedkeypolicyandregulatorymeasurestosupport renewableenergydevelopment.However,inspiteofthesemeasures,thepaceofthedevelopmentofREprojectsbyprivatedevelopershasbeenratherslow.Infact,manygapsintheexisting renewables regulatory framework (specifically, the Renewable Energy Act)havebeenidentified,namelythequestionofwhatistechnicallyfeasible,economicallydesirableandfiscallyresponsiblefortheintegrationofREintothenationalgridunderthe current context and in the future.

Nationalpublicstakeholders (e.g.,MoP,EC,ECG,GridCo,NedCo,PURC),with thesupportofdevelopmentpartners,mainlyGIZ,havetakensomemeasurestoaddresssomeoftheidentifiedgapsthatslowtheimplementationoftheREAct.Nevertheless,therearesignificantbarriersandconstraintsthatmuststillbeaddressed.Amongthekeybarriersidentifiedforscaling-upREinGhana,stakeholdersconsultedduringthepreparationoftheIPhighlightedthefollowing:

Technical Gaps

• Some resource assessments have been carried out, but not covering alltechnologiesorall regionsof thecountry.Also, thedata isnoteasilymadeavailabletopotentialinvestorswhichslowsinvestmentdecisionsandprojectpreparation.

• Weak grid that will have difficulty handling integration of a large portion ofrenewables.

Financial & Project Development Constraints

• LimitedexpertiseinstructuringloanproductsandcreditmechanismsforREinvestments.

• Absenceofguaranteefacilitiesthatcanstimulaterenewableenergyinvestments.

• Inadequateexpertiseinprojectdevelopment.

Regulatory & Institutional Barriers

• Absenceofastandardnon-negotiablePPAwithsuitabledurationappropriateforsmall-scalerenewableenergyinvestors.Forsmallprojects,asimplenon-negotiablePPAreducestimeandcostforprojectdevelopmentandfinancialclosure,while it avoidsanyperceptionof favoritismandvariationsbetweentermsandconditionsamongprojects.

• Absenceofamethodologyfortakingintoaccountrenewableenergyancillaryservices(e.g.,frequencyregulation,spinningreserve,reactivepower,etc.) in

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thetariffregime.

• Import duty relief is an important incentive for renewable energy projects.However, the relief policy is inconsistently appliedon thegroundbyGhanaRevenue Authority at Ghana’s ports of entry.

• During theprojectdevelopmentcycle,potential investorsare facedwith thecumbersomeprocessofnavigatingthroughthevariousapprovalstepsatthegovernmentlevel.Variouspermits,approvalsandconsentsarerequiredfromnumerousgovernmententities,whichleadstoatimeconsumingandarduousprocessfortheapplicant.

TheGoGisworkingonoperationalizingaRenewableEnergyAuthority(REA)asa“one-stop-shop”whichwillbeempoweredtoensureconsistentandtimelyimplementationofallaspectsofGovernment-ledrenewableenergyandrelatedpolicies. Itwillworktoshortentheprojectdevelopmentcycle.TheGoGwillrequireconsiderablecapacitysupportinordertosuccessfullyestablishtheREA.

Althougheachof thepriorityREprojects in thisSREP-Ghana IPhasaTA/capacitybuildingcomponentspecifictoeachrespectivetechnology,itisproposedthatthisTAprojectaddressbarriersthatarenotspecifictoanyparticularREtechnology,butthatconstrain the entire renewable energy sub-sector.

Objective

Theojective of this project is to assist theGoGand its keypartners in theprivateandfinancialsectorstoovercomekeytechnical,financial,regulatoryandinstitutionalbarriers that inhibit the scaling-up of renewable energy investments in the countryandmorespecificallycouldconstrain thesuccessful implementationof theflagshiprenewable energy projects financed under this program.

Project Description

Technical Component

• Support for comprehensive resource assessments for a wide range ofrenewables(tidalwave,biomass,wind,etc.)thatprovidelong-termseasonaldata (for example, biomass supply for different seasonal periods,municipalwaste)aswellasend-useconsumergenderdisaggregateddatathatcanassistthedesignofdifferentrenewableenergytechnologiessuchasnet-meteredPVsystems. This data should be gender-disaggregated, and include questionson (i) usesofenergy in thehousehold; (ii) identifying responsiblehouseholdmemberforbillpayment;(iii)genderdisaggregated-dataonwillingness-to-payfordifferenttechnologies/mechanisms;(iv)genderedpreferencesfordifferentlevels/qualityofenergyaccess.

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• Support capacity development ofmain utilities (distribution companies andGRIDCo) to undertake dynamic grid studies to determine the proportion ofrenewablesthatcanbesafely integrated intothenationalpowersupplyandaccurately forecast future estimates of the contribution of renewables as Ghana’s power sector continues to grow in size and coverage.

Financial & Project Development Component

• Provideatransactionsupportfacilityorcost-sharedgrantsforpre-investmentworkuptofinancialclosurefordevelopersandfinancialinstitutions.

• Pilot-testandrecommendthemostappropriatePRGsandotherriskmitigationinstrumentsaswellasmodelrenewableenergypaymentagreementsforprojectdevelopersinGhana.

Regulatory & Institutional Component

• Assist theGoGmove to a non-negotiable PPA of suitable duration that isappropriate for small-scale renewable energy developers.

• Supportthedevelopmentofatariffmethodologyforancillaryservicesrequiredforsmooth integrationofREgeneration inthenationalgridand improvethecurrentREFiTtoaddressbankability issues(e.g., limitationofthevalidityofthetariffto10years).

• Support the MoP to create the Renewable Energy Authority which wouldeffectively implement renewable energy projects on behalf of the GoG.

• SupporttheMoPtocreatea“one-stopshop”solutiontofasttrackgovernmentservicesrelatedtoREprojectsthatcanaddressalloftheseissues.TheSREPtoprovidesupportforaprototypeone-stopcentreforrenewableswithintherelevantsectoragencytoaddresstheissuesofinconsistencyamongthesectorplayers.

Rationale for SEFA Financing

Thiscomponentisessentialtolaythetechnical,financial,regulatoryandinstitutionalfoundations for a successful implementation of the SREP program and associatedflagship renewable energy projects.

Financing Plan

Thetotalestimatedprojectcost isaboutUSD4million,ofwhichUSD1.5million issought fromSEFA,andUSD2.5million fromotherdevelopmentpartners.

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Indicative Budget SREP GoG AFDB /SEFA IFC DPs Private Total

US $ Million 0 0 1.5 0 2.5 0 4

Lead Implementing Agencies

TheAfDBwillbetheleadMDBfortheimplementationofthisproject.TheRenewable& Alternative Energies Directorate (RAED) of theMinistry of Power and the EnergyCommissionwillbethe implementingagencyonbehalfoftheGoG.

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ANNEX 2: ASSESSMENT OF COUNTRY’S ABSORPTIVE CAPACITY

MACRO-ECONOMIC CONTEXTThe country’s commendable annual growth rate averaging 8%over the past yearshasbeenbroad-basedacrosssectors,anindicationofinclusivegrowth.Thisgrowthwasdriven largelybyperformance in service sectors,which accounted for 50%ofGDP in2013, followedby industry (includingoilproduction)at29%andagricultureat 21%.Agriculture though remains themainstay of the economy in terms of foodsecurityandemployment.TheexperiencedgrowthledtopercapitaincomeincreasingfromUSD1,622in2012toUSD1,838in2013,affirmingGhana’sstatusasamiddleincomecountry.ThegrowthhasalsoenabledGhanatomakeprogressonreducingtheincidenceofpovertywhichstandsat28.5%ofthepopulationlivingbelowthenationalpovertyline.40

Despite the Bank of Ghana’s gradual rise of its policy rate by 300 basis pointscumulativelyfrom16%inMay2013to19%inJuly2014,inflationcontinuestohoverabovethetargetrangeof9.5%+/-2%.Inflationreached17%in2014,wellabovetheCentralBank’sinflationtarget.Theautomaticadjustmentofpetroleumandutilitypricestowardscost-recoveryimplementedsinceFebruary2013,andpass-through-effectofthecontinuingdepreciationofthedomesticcurrency(byover40%in2014),areamongmajorfactorsfuelingthepersistenthighinflationrate.TherateofdepreciationoftheCediespeciallyin2014,ishighlyassociatedwiththesharpriseinnon-foodinflation,sinceGhanaiansarehighlydependentonimportedconsumergoods.

In2014economicgrowthreachedits lowest level inmanyyears.Non-oilGDPgrewatonly4.1%andwasexpectedtodeclinefurtherin2015to3.5%onthebackdropofasevereenergycrisisandfiscalconsolidation,highinterestrates,afastdepreciatingcurrency,andlowaggregatedemand.

DEBT SUSTAINABILITYAlthoughthegovernmentiscommittedtofiscalsustainabilitywiththeultimateobjectiveofreducingthebudgetdeficittoaround6%ofGDPby2016,trendperformancehas

40Poverty inGhana. TheBorgenProject, July 2013.http://borgenproject.org/poverty-in-ghana/. 15April2015.

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registeredwidenedbudgetdeficitsofover10%ofGDPforthepasttwoyears(2013and 2014). Key contributors to the widened deficit include increased spending onwagesandsalaries,interestpaymentsonoutstandingpublicdebt,arrearspaymentsonsubsidies,and low levelsof revenuecollection.With tax revenueaccounting for17.6%ofGDPin2013,Ghanadoesnotcomparefavorablywithmostcountriesinsub-SaharanAfrica,suchasKenyawithtaxrevenueofaround20%ofGDP.

As theGovernmentcontinuesexperiencinghigh levelsofbudgetdeficit, thesizeofpublicdebtrosefrom48%ofGDPin2012to55.8%ofGDPin2013.Interestpaymentsonpublicdebtistakingasubstantialshareofdomesticrevenue,risingfrom17.3%in2012to24.6%and32%in2013and2014,respectively;thusunderminingspendingonessentialsocialanddevelopmentactivities.AjointIMF/WBDebtSustainabilityAnalysisconductedinMay2014,indicatesGhanadebtriskofdistressbeingmoderate,butitsvulnerabilityhasincreasedasitsdebtservice-to-revenueratiowasapproachinghighrisklevels;projectedto45%inthelong-run.Inaddition,therecentlyraisedEurobondofUSD1.0billion inSeptember2014 is likely topushGhana’sdebt risk level frommoderatetohighriskdistress.

Toaddressallthis,the2015BudgetadoptedbyParliamentincludedastrongsetofmeasures. Swift implementation of thesemeasures, in particular the elimination ofdistortiveand inefficientenergysubsidies, thenew taxonpetroleumproducts, andstrongercontainmentof thewagebillshouldcontributetoasignificant reduction inthe fiscal deficit over themedium term, with the fiscal deficit projected to declinefrom9.5%ofGDP in2014 to7.5% in2015andabout3.5% in2017, including therepaymentsof all arrearsoutstandingat end2014.

INSTITUTIONAL CAPACITYThe electricity system is structured into three main subsystems: generation,transmission and distribution. Power generation has been unbundled creating the enabling environment of independent power producers (IPPs) to enter in electricitygeneration. The transmission system operator (TSO) is state-owned and regulated.Thereareessentiallythreedistributionsystemoperators(DSO)namelytheelectricitycompanyofGhana (ECG) responsible forsoutherndistribution,EnclavePower (EP)responsible for power distributionwithin the free economic zone, and the northernelectricitydistributioncompany(NEDCo).Therearetwoelectricitymarketsregulatedandunregulated.Therearecurrently30bulkcustomersintheunregulatedmarket.Allthe structures are under the Ministry of Power.

LineministriesandagenciesintheenergysectorgenerallyhaveagoodtrackrecordofimplementingprojectssuchastheGhanaEnergyDevelopmentandAccessProject.TheidentifiedprojectunderSREPTechnicalAssistanceaimstoassisttheGoGanditskeypartnersintheprivateandfinancialsectorstoovercomekeytechnical,financial,regulatory and institutional barriers that inhibit the scale-up of renewable energyinvestmentsinthecountry.

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ENERGY INVESTMENT IN THE AGENDA FOR TRANS-FORMATIONTheScaling-UpRenewableEnergyProgramwill,via theAfDBand IFC,support theGoGinimprovingitsenergysector,inparticularitsrenewableenergysector.TheSREPwill also support theGoG in strengthening its capacity to conceive and implementsound technical, financial, regulatory and institutional foundations for a successfulimplementation of the SREP program and associated flagship renewable energyprojectsaimedat improving theenvironment inwhichGhanaianfirmsoperate.

The concessional funding allocated to Ghana will support secure long-term publicfinancingwiththemini-gridprojectaswellasscaling-upthedeploymentofrenewableenergymini-gridssystemsinGhana.TheSREPfinancingwiththeSolarPVbasednetmetering(forSMEsandlightingproject)iskeytoensurethefinancialviabilityofthispilotphase.Itwillhelpreducethefinancingcostandhenceimprovethereturns,whichwill therefore set the stage for the sustainable rolloutof a robustprivate sector-ledroofmountedsolarPVprograminGhana.TheSREPisalsoexpectedtopavethewayfortheleveragingofsubstantialfinancingfromtheprivatesectorforutility-scalewindandsolarPVdevelopmentbyhelpingthefirstprojectsobtainappropriatelong-termfinancing.

TheSREP investmentwill benefit thecountry in leveraging fundsandbyultimatelyresulting in inclusive growth and job creation by the resulting reliable supply ofelectricityforGhanaians,SMEsandlargerindustries.ThisalsoalignswiththeGhanaSharedGrowthandDevelopmentAgendaII(2014-2017)whichidentifiespowerasthemajorbindingconstrainttotheacceleratedeconomicgrowthanddevelopmentoftheeconomy.Ghanahasthecapacitytoabsorbthisdebt.

TheSREPwillhelpsolidifyrelevantexpertiseattheMoPtohandletheimplementationof theexisting frameworkregardingrenewableenergy (e.g.,acts,codesetc).ThesefacilitieswillbeavailablefortheSREP-Ghanaimplementation.

Insummary,theconcessionalfundinggrantedtoGhanaaspartoftheSREP,willmeettheconcessionalcriteriaandwillhavelittleimpactonGhana’scapacitytoserviceitsdebt.

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ANNEX 3: STAKEHOLDER CONSULTATIONS

BACKGROUNDTheSREP-Ghana Investment Plan is the product of a comprehensive participatoryprocess involving many institutional, national, and international actors, led by theGovernmentofGhanaandrepresentedbytheMinisterofPower,withsupportfromthemultilateraldevelopmentbanks,particularlytheAfDBandIFC.Themainstagesoftheconsultativeprocesshavebeenthefollowing:

• Multipletechnicalmeetingsduringthescopingmissionwiththedevelopmentpartners,, civil society organizations, and private sector representatives(December 2014);

• Consultationswithkeynationalstakeholdersduringthejointmission,includingnational institutions, private sector representatives (sponsors, commercialbanks,etc.),civilsocietyorganizationsanddevelopmentpartners,topresentthedraftinvestmentplanandproposedinvestmentpriorities(February2015);

• PostingthedraftInvestmentPlanontheMoP’swebsitefortwoweekstoallownational stakeholders to reviewandcommenton theproposed investments(March2015).

The lists of stakeholders consulted during the missions are available in the Aide-Memoires,whichhavebeenpostedontheClimateInvestmentFunds(CIF)website.41

STAKEHOLDER FEEDBACK AND SUGGESTIONSThenatureandscopeof theSREP-GhanaIPhasbeenwelcomedandendorsedbyallstakeholders.TheircommentshavebeentakenintoconsiderationwhilefinalizingtheIP.Duringconsultations,anumberofissueswereraisedbytheprivatesector,civilsocietyanddevelopmentpartners.

Key issues raised by the private sector

MeetingswereheldwithvariousrepresentativesfromtheprivatesectorREcommunityinGhana– includingdevelopersandcommercialbanks- togetanoverviewof thecurrentsituation,aswellastheirviewsandthoughtsonhowtoimprovetheenabling

41 Climate Investment Funds. https://www.climateinvestmentfunds.org/cif/content-new-countries-under-the-srep.

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environmentforthedevelopmentoftheREmarketinGhana.Keyissuesraisedwerethefollowing:

• Implementation of the regulatory framework for RE: While in theory, theregulatory framework is appropriate, in reality it lacks consistent and clearimplementationmechanisms.TheRenewableEnergyAct(REAct)isnotclearlyandefficientlyenforcedand implemented. Inconsistencies includeconfusionon the tariffs available to developers, the conditions of Power PurchaseAgreements,thetimeandredtapenecessarytoobtainvariouslicensesandpermits, and the discretion exercised by officials on implementation of theimport duty relief policy.

• Financing constraints: Erroneous perceptions about the cost of solartechnologies,inadequatefinancinginstrumentsandhighcostofcapitalwereidentified as some of the key barriers facing players in the sector. CurrentfinancingcostonthelocalGhanaiancommercialbankingmarketisobviouslytoohigh tomakeREprojectsviable.With interest ratesofaround30%peryear, payback periods cannot exceed 8 years for solar home systems, forexample.Inaddition,appropriatelong-termfinancingisnotavailableinGhana.Theprovisionofconcessionalfacilitiesandmatchingfundswereidentifiedaspossible areas for consideration under SREP.

• One-stop shop: Currently, potential private investors have to undergo acumbersome application procedure, often involving various ministerialdepartmentstofinallygettheclearancesandagreementstheyneedfortheirbusiness.Amorestreamlinedapproachwouldbehelpful,whichcouldtranslateinto the creation of a “one-stop shop” for investors.

• Independent Power Producers (IPPs): SREP funding isperceivedasbeinginstrumentaltomobilizethekeystakeholdersandinvestors(publicandprivate)interestedinrealizinginvestmentopportunitiesintheREspaceandaddressingthevariousobstacles(e.g.,riskperception,regulatoryuncertainty,technologyrisk,financingchallenges,etc.)tocrowd-inmoreprivatesectorinvestment.

• Lack of capacities: Amain obstacle for RE IPPs is the limited capacity oftheutilitiesandregulatorstostructureandnegotiatebankablePPAsandtheweakbalancesheetofpotentialoff-takers.Capacitybuildingfortherelevantstakeholders and support to potential off-takers to improve efficiency istherefore critical.

• Availability of data: RE resource gender disaggregated data seems to be available,butisnotroutinelydisclosedbyministriesinanappropriatemanner.Improvinginformationanddatasharingwillbecriticaltofurthermobilizeprivateinvestors.

• Knowledge management and information sharing:TheefficientmanagementofknowledgeisneededtothoroughlyassesstheresultsobtainedfromearlyIPPsandtosharelessonslearnedfrompilotprojectstodemonstratetoprivatesponsorsthebankabilityofREinvestments.

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Issues raised by civil society

CivilsocietyalreadyplaysakeyroleinpromotingrenewableenergyinGhana.NGOs- particularly the Netherlands Development Organisation (SNV), the Climate ActionNetwork, and theKumasi Institute of Technology, Energy andEnvironment (KITE) -confirmed theiractiveparticipation inGhana’sREsectoraswellas their interest inparticipatingintheSREP-Ghanaactivities.ThisIPwillbuildonpastandongoingNGOactivitiesinrenewableenergytomaximizesynergiesandensureinnovativepracticesandnetworksofGhana’scivilsocietyaremobilizedtosupporttheexpansionofREinthecountry.NGOsconsultedinthepreparationofthisGhanaIPidentifiedthefollowingkeyissuesthatneedtobeaddressedtofacilitaterapiddevelopmentoftheGhanaREsub-sector:

• Limited Awareness: NGOs highlighted the need to address limited awareness ofthebenefitsofrenewableenergyamongthegeneralpublic.AkeyelementoftheSREPwillberaisingawarenessamongnationalandlocalstakeholdersaboutGhana’senergy-sectorchallengesandopportunitiesfordevelopingthepotentialofrenewableenergy,especiallyforoff-gridsolutions.

• Financing RE: Thehighup-frontcostsofREtechnologiesandunfavourablefinancingterms(interestratesthatcanbeashighas30%)weresomeofthemain challenges mentionedbyCSOsaskeyconstraintstothescaling-upofrenewable energy solutions in Ghana .

• Community perceptions of the adequacy of off-grid renewable energy options:Potentialend-usersaresometimesreluctanttoacceptdecentralizedrenewable energy solutions and prefer grid-connected solutions, mainlybecausetheyarenotadequatelysensitizedand informedaboutthebenefitsand reliability of RE off-grid solutions.

• Capacity building: ThereisaneedforadditionalcapacitybuildingtoexpandexistingGhanaianREexpertiseincivilsocietyorganizations.

Issues raised by development partners

DevelopmentpartnersconsidertheSREP-GhanainitiativeanopportunityforGhanatoacceleraterenewableenergydevelopmentasitiscloselyalignedtotheirinterventionsin thecountryandprovidesanopportunity tocrowd-inadditional resources for thescale-up of RE investments. Development partners’ support to RE developmentincludes investments and activities inmini hydro, off-grid electrification,mini-grids,solar,biomassandrelatedtechnicalassistance.Anumberofkeyobservationswereraised by development partners. It was pointed out that this SREP-Ghana IP candrawvaluablelessonsfromrenewableenergydevelopmentinitiativesofdevelopmentpartners.OfspecialinterestareinitiativesdrivenbytheAfDB,SECOandWBthatarejointlysupportingtheGhanaEnergyDevelopmentandAccessProject,inadditiontoawiderangeofrenewableenergyinvestmentsinGhana.

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TheproposedSREPoff-gridprogramwhichincludesbothmini-gridsandsolarhomesystems,dovetailswellwiththeSE4Allinvestmentprospectuswhichfocusesonenergyaccess.Thiscanprovideasoundbasisforcollaborationandcooperation.

KfW(involved in thepreparationof the12MWsolarPVprojectwith theVoltaRiverAuthority)pointedouttheneedtoimprovetheinformationwhichismadeavailabletosectorstakeholdersinordertoscale-upREinvestmentsinthecountryandencouragedSREP-Ghanatoparticipateintherefinementanddisseminationofavailableinformation.

GIZoperationsintheREsectorfocusontheproductiveuseofenergyandfinancingforsmall-scaleprojectsthrougharesults-based-evidencescheme.GIZwelcomedthepre-identifiedSREPinvestment,particularlythetechnicalassistanceprojectwhichisexpectedtocomplementtheTAsupportalreadyprovidedbyGIZtoMoP.

Comments Received on the Draft Investment Plan Posted on MoP Website

Inordertofacilitatereviewbynationalstakeholders,theInvestmentPlanwasmadeavailableontheMoPwebsite.42

42GhanaMinistryofEnergy.DraftInvestmentPlan.www.energymin.gov.gh/Power/?page_id=37.2April2015.

ANNEX 4: RATIONALE FOR RANKING AND SELECTING PRIORITIES FOR SREP SUPPORT

Criteria Tidal Wave Solar Wind Small Hydro Biomass/ Waste Power

Mini-Grid Stand-Alone Systems

SREP CriteriaIncreased installed capacity from renewable energy

Low. Technology yet tobeproven;resource potentialmay be high but yet to be assessed.

High. Irradiationlevelranging from 4to6kWh/m2 but constrained bydiffusedradiation and absorbable capacityduetointermittency;policytargetof150MWvs.8MW today.

Moderate. Concentrated alongthecoast(5to6m/sat50mmastheight,2,000MWexploitablepotential)andconstrained by absorbable capacityduetointermittency;policytargetof300MWvs.0MWtoday

Low. Potential estimated at 4 MW

Moderate. Exploitablepotentialestimated at above100MW

Moderate. Approximately2,000lakesideand200islandstobeelectrified.About70MWload

Low. Large number of potentialusers,butsmallunitcapacities(maximum50W)

Increased access to energy through renewable energy

Low. Sameasabove

Moderate. Helpsaccessbutsupplyintermittent

Moderate.Helpsaccessbutsupplyintermittent

Low. Helpsaccessto lesser extent due to seasonality

Moderate. Helpsaccess with dispatchablepower

High. Directly increases access to millions in hard-to-reach areas

High. Directly increases access to millions in hard-to-reach areas and can be used as aback-upoptioninurban areas.

low emissions development

High. No global warming emissions

High. No global warming emissions

High. No global warming emissions

High. No global warming emissions

High. No global warming emissions

Moderate. Hybrid systems would result in somelevelofemission

High. No global warming emissions

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Criteria Tidal Wave Solar Wind Small Hydro Biomass/ Waste Power

Mini-Grid Stand-Alone Systems

SREP CriteriaAffordability and competitiveness

High. If resource is confirmed,low-cost electricity

Low. Cost remains high in Ghana despitethefactthat it is coming down in the globalmarket

Moderate. Cost cancomparefavourablywithconventionalsystems

Moderate. More affordablethanlatest IPPs

Moderate. More affordablethanlatest IPPs

High. Less costly than grid connection bydisplacinginvestmentsintotransmission and distribution networks,andreduction in fuel cost for generation

Moderate. Less costly than diesel generation or useofkeroseneand batteries. Subsidies needed for affordability.

Productive use of energy

High. Base-load,reliablepowersupplyhelpsimprovesproductiveuse

Moderate. Intermittent powermustbebackeduptosupplyreliablepowerneededforproductiveuse

Moderate. Intermittent powermustbebacked-uptosupplyreliablepowerneededforproductiveuse

Moderate. Seasonal intermittency must be backeduptosupplyreliablepowerneededforproductiveuse

High. Base-load,reliablepowersupplyhelpsimprovesproductiveuses

High. Quality and quantity of powersuitableforproductiveuse

Moderate. Affordabilityusuallylimitspowerlevelsperuser;suitableforhouseholdsuse,commercial and agriculturalactivities

economic, social, and environmental benefit

Moderate. Potential adversesocialimpactsifpowerplantareaisrestricted for fishing

Moderate.Land requirements mayconflictwith other uses;mustbe designed to meet environmentalstandards

Moderate.Land requirements mayconflictwith other uses;mustbedesigned to meet environmentalstandards.

High. Run of the riversystemswith limited environmentaland social impacts

High. Addressing sanitation issues;economic benefitshigh in local communities insupplyingfeedstockfromsustainable sources

High. Reliable electricity brought to community sooner than possiblebygridextension;income generation potentialsupportedbyelectricitysupply

Moderate. Reliable electricity brought to community sooner thanpossiblebygridextension;environmentalimpactofimproperbatterydisposalmustbemanaged

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Criteria Tidal Wave Solar Wind Small Hydro Biomass/ Waste Power

Mini-Grid Stand-Alone Systems

SREP Criteria

economic and financial viability

Moderate. Ongoing14.5MWphase1projectofalarger1,000MW with a signed PPA withpromisingeconomic andfinancialviability

Moderate. Goodfinancialreturns with current feed-intariffpolicy;Forexrisksrelated to the feed-intarifftobe mitigated

Moderate. Good financialreturnswith current feed-intariffpolicy;Forexrisksrelatedtothefeed-intariffto be mitigated

Moderate.Goodfinancialreturns with current feed-in tariffpolicy;Forexrisksrelated to the feed-intarifftobe mitigated

Moderate. Good financialreturnswith current feed-intariffpolicy;Forexrisksrelatedtothefeed-intariffto be mitigated

High. Less costly than grid connection bydisplacinginvestmentsintotransmission and distribution networks,andreduction in fuel cost for generation

High. Less costly than diesel generation oruseofkeroseneandbatteries;subsidies needed for affordability

leveraging of additional resources

Low. New technology yet tobeproven–highrisk

High. Manypartnerssupportsolardevelopment

High. Manypartnerssupportwinddevelopment

Moderate. Manypartnerssupportmini-hydro;howeverlimited room forleveragingresources considering the limited potential

High. Manypartnerssupportbiomassdevelopment

High. High interest frompartnerswho are willing to consider supportingsubsidy schemes

High. High interest from partnerswhoarewilling to consider supportingsubsidyschemes

Gender equity

Low. Bulkgridelectricity suppliesdonottarget women

Low. Bulkgridelectricity suppliesdonottarget women

Low. Bulkgridelectricitysuppliesdo not target women

Low. Bulkgridelectricity suppliesdonot target women

High. Better participationof women and additional income stream through sale of feedstock.

High. Benefitswomenand children as households are predominantusersandbenefitfrom social amenities

High. Benefitswomenand children as households are target users

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Criteria Tidal Wave Solar Wind Small Hydro Biomass/ Waste Power

Mini-Grid Stand-Alone Systems

SREP CriteriaCo-benefits of RE scale-up

Moderate. Offsetsfossil-fuel use and improvesairquality;increased income opportunities

Moderate. Offsetsfossil-fuel use and improvesairquality;increased high-valueemploymentand income opportunities

Moderate.Offsetsfossil-fuel use andimprovesairquality;increased high-valueemploymentand income opportunities

Moderate. Offsetsfossil-fuel use and improvesairquality;increased high-valueemploymentand income opportunities

High.Offsetsfossil-fuel use andimprovesairquality;createsopportunitiesfor farmers through sale of agricultural waste;increasesincome opportunitiesfor fuel wood suppliers

High. Increased energy security andimprovedair quality for vulnerableand small communities;enhanced socioeconomic conditions;avoidsriskfromkeroseneandcandlefires

High. Increased energy security and improvedairqualityforhouseholds;enhanced socioeconomic conditions;avoidedriskfromkeroseneandcandlefires

National Criteria

contribution to the 10% renewable energy mix of the GoG by 2020

Moderate. Expectedcapacityof14.5MWmaycontribute significantlyto the target

High. Contributes about30%oftotaltarget(150MW)

High. Contributes about60%oftotaltarget(300MW)

Low. Marginal contribution to total target

High. Contributes significantlytototaltarget;baseload;nocapacitycap

Moderate. Expectedcapacityof15MWmaycontribute significantlytothe target

Low. Expectedcapacityof2MWcouldcontribute significantlytothetarget

contribution to the universal access (at least 90%) target of the GoG by 2016

Low. Technology yet to be proven;theresource potentialcould be high but is yet to be assessed

Moderate. Helpsaccessbutsupplyintermittent

Moderate.Helpsaccessbutsupplyintermittent

Low. Helpsaccessto lesser extent due to seasonality

Moderate. Helpsaccess with dispatchablepower

High. Directly increases access to millions in hard-to-reach areas (54%ofislandcommunities to be connected through mini-grids)

High. Directly increases access to millions in hard-to-reach areas and can be used as aback-upoptioninurban areas

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Criteria Tidal Wave Solar Wind Small Hydro Biomass/ Waste Power

Mini-Grid Stand-Alone Systems

SREP Criteriacontribution to peak load

Moderate. May contribute topeakloadsubject to confirmationby ongoing project

Low. May contribute topeakloadifpeakshifts

Moderate. Wind coincides with nationalpeakloadprofile

Moderate. May contribute topeakload

High. Will contribute to peakloadsincedispatchable

High. Will contribute topeakloadatcommunitylevel

High. Willcontributetopeakload at household level

Project implementation readiness

Moderate. Oneprojectongoing with potentialforscaling-upto1,000MW

High. Nine siting permitsandtwoconstruction permitsissuedtosolarprojectdevelopers

Moderate. One siting permit(for250MW)havebeenissuedtoNEK;VRA and Infraco areundertakingWind Resource Assessments

Low.Feasibility studies completedforone60kWsite

Moderate.3Sitingpermitsissued to solarprojectdevelopers

High. Fourpilotprojectsunderway and regulatory frameworkbeingdeveloped

High. About40,000systemsinstalled;regulatoryframeworkbeingdeveloped

total 26 30 30 24 36 39 35

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ANNEX 5: EXTERNAL REVIEW

Peer Review Comment Response

1.0 COMPLIANCE WITH SREPcatalyse increased investments in renewable energyTheGhanaIPproposestoincreasetheinstallationofREsystemstomeetthedemandforelectricity,especiallyinareaspresentlyun-servedbytheelectricitygridandexpandenergyaccess.TheIPproposesprogramsthatwillinstallgrid-connectedREsystemsand stand-alone RE systems and provide technical assistance which is consistentwiththeobjectivesoftheSREP.Whileitisproposedtoleveragefundsfromadditionalsources,itisnotclearhowtheprogramswillcatalyzeadditionalinvestmentsbeyondtheproposedprogram.Thisaspectisaddressedingreaterdetailinthecommentsonspecificprograms.

Well noted.

Co-Benefits from ProgramsTheGhanaIPinSection5.6providesadescriptionoftheco-benefitsfromtheprogram.However,theco-benefitsaredescribedverygenerically.REprograms,ingeneral,wouldall result in co-benefits, and the IP does not correlate the benefits to the proposedprograms. Itwouldbeuseful toprovidesome indicators, suchashouseholds tobeelectrified,tolinkthepotentialco-benefitstothespecificprogramsproposedintheIP.

ThishasbeendoneinANNEX1:DETAILEDINVESTMENTBRIEFS.Eachinvestment project has a section on the expected results where theindicators, such as households to be electrified, are presented.

Promote Private Sector Investments in reWhile theprogramdescriptions in the IP indicate that theywillbe leveragingprivatesector investments, they also emphasize the need for concessional financing andincreasedpublicfinances.ItissuggestedthattheprogramdescriptionsindicatehowSREPfinancingwillleadtoincreasedprivateinvestments.Thisaspectisaddressedingreaterdetail in thecommentsonspecificprograms.

RelatedtoProject3.Utility-ScaleSolar/Windisexpectedtoleveragethemostprivatesectorparticipation.SREP fundswillbeused tocatalyzethe first utility-scale RE projects in Ghana leveraging private sectorinvestments (it is expected thatUSD1ofSREP fundswill leverageatleastUSD1ofIFC,USD1fromtheprivatesectorwindowoftheAfDBandUSD2fromtheprivatesector.Moreover,theseinvestmentswillhelpcreateatrackrecordofviableREprojects,whichinturnwillhelpmitigateperceivedinvestorrisksandreducethecostoffinancingfutureprojects,demonstratingGhanaian RE sector potential to financiers and helpingattractfurtherprivate investment inthefuture.

Relatedtothetwootherinvestmentprojects.Itisexpectedthatprivatesectorfinancingwillbemobilizedmainlythroughthecommercialbanksandstrategicsuppliers.

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Peer Review Comment Response

Blend Financing from Multiple SourcesTheGhanaIPindicatesthatitwillleverageadditionalfinancingfromMDBs,governmentand the private sector for program scale-up. Program descriptions indicate thechallengesoffinancingREprogramstobenefitremoteareasandemphasizetheneedfor blending SREP financingwith increasedMDB and public finances to implementprograms. This aspect is addressed in greater detail in the comments on specificprograms.

Well noted.

KnowledgeSharingandIncorporatingLessonsLearnedOneoftheobjectivesofSREPistofacilitateknowledgesharingandtheexchangeofinternationalexperienceandlessons,andtoincorporatelessonsintoprogramplanning.TheGhanaIPincludesadescription(Section8.4)ofhowknowledgemanagementandsharingoflessonswillbeakeyaspectofprogramimplementation.

Well noted.

Preference for Poverty Alleviation BenefitsSREPgivespreferencetoprojectswithstrongpovertyalleviationbenefits.Economicand/orsocialdevelopmentandenvironmentalbenefitsarethereforekeycriteriaduringprojectselection.TheGhanaIPtargetstheexpansionofenergyaccesstoremoteruralareas,whichpresentlyhaveinadequateornoenergyaccess.Theprovisionofenergytosuchareasislikelytoresultinpovertyalleviation,economicbenefits,andsocialandenvironmentalbenefits.

Well noted.

PotentialforProgramScale-upAkeySREPcriterionisthepotentialoftheproposalfordemonstrationandreplication,particularlythepotentialforremovingbarriersintheenablingenvironmentbeyondtheimmediateprojectboundarytofacilitatescaling-upthroughprivatesectorinvestments.Thisaspect isnotveryapparentfromtheprogramdescriptionsgiventhechallengescited for RE. It is suggested that the potential for scale-up, especially with privatesectorinvestment,bedescribedintheIP.Thisaspectisaddressedingreaterdetailinthecommentsonspecificprograms.

Thishasbeenrevisedandthepotentialforscale-upineachoftheprojectconceptnoteswelloutlined.

Enabling EnvironmentTheGhanaIPisconsistentwithpoliciesandplanstoexpandtheelectricityinfrastructureandpromoteRE.TheIPindicatesthatthecountryhasanenablinglegalandregulatoryframeworktopromoteRE.The IPalsoacknowledgessomeof thepolicy, regulatory,andfinancingchallenges togridconnectedREsystemsandseeks toaddress themthroughtechnicalassistance,which isoneoftheproposedprogramstobefinancedby SREP.

Well noted.

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Increased Energy AccessTheGhanaIPproposestoincreaseenergyaccesstoremoteareasofthecountrywhichare presently under-served or un-served and helps expand energy access from thepresentrateof70%ofhouseholds.

Well noted.

ImplementationPlanandCapacity

TheGhanaIPidentifiestheMinistryofPower,theEnergyCommission,andtheAfDBandIFCassomeoftheagencieswhichwilltaketheleadinimplementingtheproposedprograms.However,theIPdoesnotdescribetheimplementationcapacityofthelocalinstitutions nor does it provide a framework for how programs are proposed to beimplemented.Thisaspect isaddressedingreaterdetail inthecommentsonspecificprograms.

Abroadlevelframeworkforimplementationandcapacityofimplementingagencieshasbeenprovidedanddemonstrated intheon-going/currentefforts.

Theframeworkforhowtheprogramswouldbe implementedhasbeenprovided.

Long-Term Economic Viability of the RE SectorThesupportforoff-gridandgridconnectedprogramsandfortechnicalassistanceislikelytohaveapositiveimpactonthelong-termviabilityoftheREsector.Itisnotclearfrom the IP if the programswill have a transformative impact onRE installations inGhana.Thisaspectisaddressedingreaterdetailinthecommentsonspecificprograms.

Provided.

Refer to results framework and concept notes as well the investmentsection.

2.0 GeNerAl coMMeNtS oN tHe GHANA IPGhana is doing relativelywell economically and has a relatively high rate of energyaccess (70%) amongcountries in sub-SaharanAfrica. The countryplans to expandenergyaccessto100%by2016(atargetwhichhasbeenmovedforwardform2020)andalsoplanstogenerate10%ofitselectricityfromREby2020.TheIPcouldmakeastrongercasefortheneedforSREPfinancingtofurtherexpandenergyaccessandpromote increased installationofREsystems.

Well noted. SREP rational has been strengthened for each proposedinvestment project.

The IPprovidesa lot of data and informationon the energy sector andwhile someof it is referenced, thesource forsome information isnotcited. It issuggested thattheIPprovidefootnotesorendnoteswithreferencesforallstatisticaldataandotherinformation.

Noted and addressed.

TheIPreferencesthegenerationexpansionmasterplanforGhanabutdoesnotprovideanydetailsofplannedgeneration.ItissuggestedthattheIPprovideabriefsummaryofthegenerationplantsproposedinthemasterplan,includinganyplannedREsystemstomeetthe2020targetandtheforecastaverage(and/ormarginal)costofgeneration.ThiswouldprovideusefulcontextforunderstandingthechallengeoffinancingREinthecountry,despitethefactthatretailtariffshavebeenperiodicallyincreasedtoallowutilitiestorecovercostswithoutsubsidies.

ProvidedinSection3Figures5to7.

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Peer Review Comment ResponseThe IPdescribes theFeed-in-Tariff (FIT)mechanism inGhanaandcitessomeof thechallengesincludingthefactthatitoffersonlya10-yearvalidity,whichiscitedasbeinginadequateforRE.ItissuggestedthattheIPprovideasummarydescriptionofhowtheFITwasestimated(marginalcostbased,rateofreturnbased,etc.)anddescribewhyitisconsideredinadequatebyprojectinvestors.ThiswouldstrengthentherationaleforSREPfinancingforpromotingREsystems.

AsdescribedintheIP,thecurrentFiTinGhanaareofferedforamaximum10yearPPA,whichisconsideredtooshortaperiodtoattractthelong-tenor private financing necessary to make utility-scale projects cost-effectiveandfinanciallysustainable.REprojectstypicallyhavepaybackperiodsconsiderablylongerthan10years,thusinvestorsareunwillingtocommittorevenueuncertaintybeyond10years.

FeedbackfromstakeholderconsultationsidentifiesthekeyissuesforincreasedREtobethelackofastreamlinedprocessforREprojectdevelopment,lackofclarityintheFITmechanism,theneedtoeffectivelyimplementtheexistingregulatoryframework,needto improveaccess todataonRE resourcesandaffordablefinancing.TheproposedprogramsintheIPaddressthesekeychallenges.

Well noted.

ThedescriptionoftheGEDAPappearstoindicatethatthereiscustomerwillingnesstopayforstand-aloneREsolarhomesystems(SHS)andoneoftheprincipalchallengesisthecapacityofsolarPVsupplierstoobtainadequatefinancingforworkingcapital.ItalsoappearsthatGEDAPwasasuccesswithfinancingsupportfromARB-APEXBank.Itisstatedthatthebusinessmodel,whilesuccessful,isnotreplicableduetointernalbank restructuring which has led it to focus on other core banking functions. TheimplicationappearstobethattheGEDAPmodelwassuccessfulinpilotingmini-gridprojectsandwouldcontinuetosucceedifthebankhadnotrestructuredandchangedpriorities.It issuggestedthattheprogramsintheGhanaIPclearlydemonstratehowtheyarebuildingonthissuccessfulbusinessmodelwhichneedstheparticipationofmorecommittedfinancial institutionsratherthanconcessionalfinancing.

YesandclearlydemonstratedintherevisedIP.

The IP indicates that Ghana has developed a framework for a RE Fund (REF) toprovide long-termfinancingsupport fordevelopmentofREresources.The legalandregulatoryframeworkalsoappearstocreateanenablingenvironmenttopromoteREand attract private sector investment. It indicates that studies are being conductedwithMDBsupporttoaddresschallengestomini-gridandstand-aloneREsystems.TheIPalsostatesthattheMinistryofPowerhasplansto installREsystemswithatotalinvestmentofUSD1.4to2.6billion.TheGovernment,withthesupportofMDBsanddonoragenciesalsoappears tobecomprehensivelyaddressing thevariousbarrierstoimplementationofRE.TheIPwouldbestrengthenedifitclearlydescribedhowtheproposedprogramsbuildon theseeffortsand the technicalassistancecomponentscomplement rather thanduplicate theseefforts.

IPisbuildingontheseeffortsbyaddressingthebottlenecksandpilotingprioritisedprojectsforpotentialscale-up.

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3.0 ProGrAM SPecIFIc coMMeNtS General TheIPprovidesnoinformationonproposedprocessestoimplementeachinvestmentprogramotherthanstatingthenamesofagenciesthatwillleadtheeffort.ItissuggestedthattheIPprovideanindicativeimplementationprocessforeachprogramcomponent,whichisbestsuitedtoachievetheobjectivesoftheprogramanditscomponents.

A high-level implementation schedule has been proposed for eachproject. Implementation modalities for the whole program are alsodiscussed.Astheprojectsarecurrentlyattheconceptstage,thedetailedimplementationmodalitieswillbedefinedduringPhase2oftheprogram,with the assistance of the PPGs.

TheIPdoesnotaddresshowoperationsandmanagement(O&M)willbeprovidedandfundedfortheproposedpilotprojects.ItissuggestedthatanindicativeO&Mplanbeincluded.This isespecially importantsincepast learninghas indicatedthatprogramfailures and loan defaults occur when O&M fails.

Same comment as above for theO&M,which has been discussed athigh-level in the IP.AdetailedO&Mplanwill bedevelopedduring thepreparation phase of the projects.

TheIPdoesnotprovideorproposeaviablemechanismforchannelingMDBfundstothevariousprogramsandtheircomponents.Itissuggestedthataschematicbeincludedto indicate the channeling of SREP and MDB funds consistent with their requirements. ThechannelingofGoGandprivatesectorfundsshouldalsobeindicated.

Same comment as above for the financial management details. Adetailedfinancialmanagementassessmentwillbeundertakenduringthepreparation phase of the projects.

TheIPdoesnotprovideadequate informationonhowitproposesto leverageSREPsupporttoraiseadditionalfundsofatleastfourtimesthefinancingsoughtfromSREP.

ThefinancingplanfortheprogramispresentedintheIP.USD40millionwill leverageanadditionalUSD190millionfromtheGoG,DPsandtheprivate sector. There has been a tremendous amount of interest fromDPsduringthepreparationoftheinvestmentplan.Oncetheprojectsareprepared,theleadMDBwillseekco-financingfromtheDPs.

Renewable Mini-Grids and Stand-Alone Solar PV SystemsIt is suggested that the IP clearly state how the proposed mini-grid systems willdemonstrate learning,which isdistinct from the learning forotherpilotprojectsandongoingefforts.Thisisespeciallyimportantsincetheproposedprogramispremisedonpublicfinancingformini-grids,whichwouldsuggestthatitwillbereplicatedwhenpublic financing supplemented by concessional financing becomes available.

Under the technical assistance component, therewill be a fine-tuningofproposedownership,operationandmanagementmodels.Thatfine-tuning will be informed by the lessons learnt from the existing models and initiatives.

TheIPstatesthat55mini-gridswillbeinstalled.ItissuggestedthattheIPprovidesomedetailssuchasthetypicalsizeoftheplannedmini-grids,thesourceofgeneration,thenumberofhouseholdstobeconnectedwithineachmini-grid,theaveragegenerationcost(basedonproposedREgeneration),costofthemini-gridsystem,etc.ThesystemscostsareimportanttoprovidecontexttotheSREPsupportandtotalfinancing(includingleverage)beingsoughtfortheprogram.

ProvidedinSection5.3.1.

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TheIPalsoprovidesthetotalnumberofstand-alonesolarPVsystemstobeinstalledat households andpublic facilities. It is suggested that the IP provide somedetailsoftheprogramssuchasthetypicalsizethePVsystemsforeachtypeof installation(household,schools,healthcentres,etc.),theaveragecostofinstallation,theprovisionofbatterybackup,etc.ThesystemscostsareimportanttoprovidecontexttotheSREPsupportandtotalfinancing(includingleverage)beingsoughtfortheprogram.

ProvidedinSection5.3.2.

The financing plan for this program should be clearly demarcated between the twoprogramcomponents:publiclyfinancedmini-gridsandprivatesectorledsolarPVstand-alonesystems.TheIPpresentlyprovidesatotalbudgetforthecombinedcomponents.

ProvidedinSection5.3.3.

Solar PV Based Net MeteringTheprogramdescriptionappears toemphasize thedemonstrationof theviabilityofsolar PV systems with optimal storage to address issues related to grid reliability.Presumably,apilotprojectisnotneededtoexaminejustthefinancialviabilityofsolarPVsystemswithstoragebackup.Theemphasisrathershouldbeondemonstratingthemeritsandchallengesoffeedingpowerbacktothegridandtheissuesrelatedtogridstabilityandnetmetering.TheIP,infact,statesthattheprogrammayfacethesamechallengesasamuchlargerprogramtoinstall200,000rooftopnet-meteredsolarPVsystems.The IPshould thereforemakeaclearcase forwhythisprogram isneededwhenthelargerprogramwillalsopresumablydemonstrateandexamineissuesrelatedto net metering.

Wellnoted.Thedescriptionhasbeenre-writtentoreflectthechallenges.

Itshouldbenotedthatthe200,000programissomehowdifferentfromthisnet-meteredprojectasitwillbedeployingstandalonesystemsandnot grid-tied ones as is the case with net metering.

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Peer Review Comment Response

TheIPstatesthataffordabilityofSPVhasnotbeenachallengeanditisprimarilytheequipmentsupplierswhohavelackedthecapacitytomobilizeworkingcapital.Giventhepastexperiencewithcommercialbanksupportforastand-aloneSPVinstallation,theIPshouldclarifywhyconcessionalfinancingisnecessaryfortheproposedsmallsystemswithstorage,especiallygiventherelativelyhightariffsinGhana.

Wellnoted.Thetexthasbeenupdatedtoreflectthefollowing:“Consideringthehighupfrontcostandtheperceivedhighriskoffinancingrenewable energy projects, concessional financing from SREP wouldhelp reduce the upfront investment cost of netmetering with storageoptionandboostdemandandcustomerconfidence.Since the completion of the pilot grid-connected solar PV project,additionalfundingtoscale-uptheprojectcouldnotbesecuredtodate.SREPcouldleveragetherequiredfinancingandprovidetheappropriateframeworktoscale-upthepilotgridconnectedproject.TheexperienceinGhanacouldthenbereplicatedintheECOWASsub-regionandcreateneweconomicopportunities for the renewableenergy industry.Inaddition,bycatalysingthefirstnet-meteredrenewableenergyprojectinGhanathroughSREP,technicallossesinthenetworkwouldbereduced.Improvementinlocalnetworkvoltagewillalsobecomeevidentastherewill notbe theneed forpower tobe transmitted fromafar.Customerswouldalsobeabletoreducetheirdependencyonthegridandelectricitybillsinthewakeofincreasingtariffs.”

The program indicates that 15,000 systems are to be installed. It is suggested thattheIPprovidesomedetailsoftheprogramssuchastypicalsize(s)ofthesystem(s)tobeinstalledateachfacilityandtheindicativecosts.ThesystemscostsareimportanttoprovidecontexttotheSREPsupportandtotalfinancing(includingleverage)beingsought for the program. The project component could also include examining theimpactofnetmeteringonutility revenuesandcost recovery.

Thesizesofthesystemsdependontheconsumptionprofilesofcustomers.Thesecould typically range from500W to15kWp.TheestimatedcostwouldbefromUSD1,200toUSD37,500persystem.

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Peer Review Comment Response

Utility-scale Solar PV/Wind Power GenerationTheIPnotesthat25grid-connectedsolarPVinstallationswithacombinedcapacityof7MWareoperationalandanadditional20MWprojectisunderconstruction.Afurther15 IPPs have been provided clearances by the Energy Commission. The IP shouldclearlyidentifytherationaleforthisproposedprogram,whichessentiallyisdesignedtodevelopastreamlined,transparent,andcompetitivemechanismforgrid-connectedsolarandwindprojects.TheIPshouldalsodistinguishthemeritsoftheprogramsincethecountryalreadyhasdevelopedaFITmechanism,whichtooisdesignedtoprocuregrid-connected RE through a transparent and streamlined mechanism (though notnecessarily a competitive mechanism since the tariffs are fixed). While the presentFITmechanismsappear tohavesomedrawbackswhichneed tobefixed toattractinvestments,theIPappearstofocusoncompetitivemechanismswhereeachPPAhastobenegotiated.Ifthatistheobjective,itshouldbemadeclearandshouldbeshowntobuildonGhana’sexperienceinattractingIPPs.

In response to the first part of the comment related to the technicalassistance component of theUtility-scaleSolar andWindProject, thecomments have been acknowledged. After further discussions andconsultations,theGovernmenthasdecidedtoexcludetheTAcomponentforthisprojectfromtheSREPInvestmentPlan.Theactivitiesproposedunder this component will be further revised and considered underdifferent initiatives carried out by the Government.Inresponsetothesecondpartofthecomment,whilstachangeintheregulatory framework may be necessary in the medium to long-termin order to further enhance the RE FIT mechanism, this is a lengthyand cumbersome process that requires careful study and some initialexperiencewiththeexistingmechanism.Theobjectiveoftheinvestmentcomponentoftheproject istosupportthedevelopmentofthefirstREprojectsundertheexistingregulatoryframeworkinordertodemonstrateboth its strengths and weaknesses. Its weaknesses can then beunderstood in more detail and in the context of real (as opposed totheoretical) experience,whichwill enablemore informed and effectiveenhancement of the regulatory framework.Thetechnicalassistancecomponentforthisprojecthasbeendropped.

Amongthechallengestoutility-scalegridconnectedREcitedintheIParetheweaktransmissionanddistributionnetworkinGhanaandtheweakfinancialcapacityofoff-takerstopurchaseREpower.ItissuggestedthattheIPstatehowthesechallengeswillbe addressed.

Concessional financing from SREP can help mitigate the perceivedinvestorriskofweakoff-takersbyhelpingtobringREprojecttariffsdowntomoreaffordable levels, therebyreducing the futureburdenofREonfinancially challengedGhanaian utilities. By catalysing the first utility-scaleREprojects inGhana,SREPwill alsohelpGovernment carefullyassess the grid impact of utility-scale RE and make more informedplanning decisions for scaling-upRE in the future.

TheaboveexplanationwillbeaddedtotheIPassuggested.

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The IP indicates that there is a lot of interest in developingwind energyprojects inGhana.WBissupportingwindresourcesassessments.VRAhasplansfora150MWwindfarmandisconductingassessments.ASwissfirmhasa licensefora250MWwindfarmandisconductingfeasibilitystudies.Anotherfirmhasalicensefora30-50MWwindfarmandisconductingstudies.Grantedthesehavenotyetbeeninstalled,butitdoesnotpointtolackofprivateinvestorinterest.TheIPshouldclearlyindicatehowtheproposedprogramsaredistinctfromtheseotherefforts,orwhatspecificchallengesitwillhelpovercomethattheotherplannedwindenergyprojectsdonotaddress.

Whilst a small number of firms have invested limited amounts in theearlydevelopmentofREprojectstodate,nowindprojecthasreachedfinancialcloseorstartedconstruction,andonlyonecorporate-financedsolarPVprojectisunderway.Therearenoutility-scaleREplantsinGhanatodayduetochallengesdescribedintheIP,including:lackoflong-termfinancing;limitedexperienceandtrackrecordofREprojectdevelopmentbysponsors;andperceptionofpaymentriskrelatedtothenewlygazettedtariffs or FiTs. SREP will help the first utility-scale RE projects obtainappropriate long-term financing, demonstrate theGhanaian RE sectorpotentialtofinanciersandhelpattractfurtherinvestmentinthefuture.

Size and cost for the planned investment project should be provided to show thecontexttotheSREPsupportandtotalfinancing(includingleverage)beingsoughtforthe program.

The information is included in the project description annexes aswellas in the results framework table. With respect to the private sectorinvestmentsunderProject3(Utility-ScaleSolarPVandWindProject),itisanticipatedthataprojectwillaverage20MWinsize,andeachUSD1ofSREPfundswillleverageatleastUSD1fromIFC,USD1fromtheprivatesectorwindowof theAfDBandUSD2 fromtheprivatesector.

Technical Assistance The IP proposes three components to this programs that will address technical,financialandregulatory/institutionalchallengestoincreaseduptakeandprivatesectorinvestmentinREprojects.ItissuggestedthattheIPindicatehowitwillbuildonandbedistinctfromothereffortswhichalsoseektoaddresschallengestoscale-upofRE.

ClearlydemarcatedinSection5.3.4.

The financing plan for this component provided in Annex 1 needs to be revised toindicate proposed program budget and SREP support.

Wellnotedandrevisedappropriately.ThereisnoSREPsupportrequestedfor this component as itwill be fundedwith theAfDB-managedSEFAtrust fund and other DPs.

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