- Grant Total: $498,200,000
- Signed: August 5, 2014
The Millennium Challenge Corporation will invest up to $498.2 million to support the transformation of Ghana’s power sector and stimulate private investment. The five-year Ghana Power Compact seeks to create a financially viable power sector that will meet the current and future needs of households and businesses—and ultimately help fight poverty across the country.
The compact will play a critical role in Power Africa, the U.S. Government’s initiative to double access to power on the African continent. The Ghana Power Compact is the largest U.S. Government transaction to date under Power Africa and will serve as an anchor for increased American engagement in Ghana.
At the heart of the compact is a strong commitment from the Government of Ghana to implement reforms needed to transform its power sector and put it on a path to profitability and sustainability, ultimately creating a climate that will attract private investment. The government has also pledged to invest at least $37.4 million of its own money, and the compact is expected to catalyze at least $4.6 billion in private energy investment and activity from American firms in the coming years.
The $10 million project will test the most cost effective approaches to address the key constraints that micro, small and medium enterprises in markets and economic enclaves face in obtaining safe and legal access to electricity. This small project is designed to be innovative; it will test several different interventions aimed at reducing critical barriers to legal connections for these businesses in a small sample of markets and economic enclaves and provide evidence of effective approaches to increasing access for the distribution utilities with the intent of facilitating scale up of those interventions in the future.
The project aims to improve the governance and management of this Ghanaian electricity distribution utility by bringing in a private sector operator and making infrastructure and foundational investments designed to reduce losses and improve service quality.
The project includes investments to attract private sector participation, support integrated loss management, reduce distribution system vulnerability to theft and meter manipulation, lower thermal losses in the distribution systems, and reduce the frequency and duration of outages by introducing improved system protection and sectionalizing devices in the distribution system.
The $25.4 million project will help improve energy efficiency and demand-side management policies and support investments to cost-effectively bridge the gap between supply and demand. The project will develop and enforce energy-efficient standards and labelling, build capacity for improved energy auditing, launch a public-awareness campaign to promote energy efficiency, and launch a pilot project to introduce distributed applications like solar photovoltaic backup power for lighting and electronics, off-grid solar systems, and grid-connected solar systems.
The project will initially provide $5 million in technical assistance to improve operations of the Northern Electric Distribution Company (NEDCo), a distribution utility that serves the northern regions of the country. No later than the conclusion of the first year of compact implementation, MCC will evaluate economic rates of return for possible system and infrastructure investments. If resulting ERRs are acceptable, MCC will make investments up to $49.2 million.
The $16.3 million project prioritizes the alleviation of major constraints to private sector investment in generation. The project will leverage ongoing advisory support provided by USAID to operationalize Ghana’s “gas to power” plan and commercialize the country’s gas sector; support the development of an independent power producer framework that addresses generation, transmission, distribution and demand-side management in a holistic and integrated fashion; and fund a technical feasibility subject to provide a “shovel-ready” project to increase the country’s import of liquefied natural gas.
The $5 million project aims to improve the regulatory monitoring and independent verification of sector performance and improve the tariff review process by supporting studies that will provide critical inputs to the redesign of the tariff structure.