Dr. Elikplim Kwabla Apetorgbor, the CEO of the Independent Power Producers (IPPs), has hinted that the adoption of the Emissions Levy, which went into force on February 1, 2024, may result in higher electricity prices.
He issued a warning that the GH?100 per tonne of carbon dioxide (CO2) emissions charge will raise the cost of producing power, or the cost per kilowatt-hour (kWh), raising consumer rates.
"Any legislative change that affects the price at which electricity is generated would undoubtedly have an effect on end users through the tariff.
"Therefore, before enacting such laws, our decision-makers must consider the effect of the economic consequences," he said.
He explained that a 1 MW natural gas-fired power plant operating at 50% efficiency emits about 362 kg of carbon dioxide (CO2) for every megawatt-hour (MWh) of electricity generated. The amount of CO2 emitted by a 1 MW gas-fired power plant depends on several factors, including the efficiency of the power plant, the type of gas used (typically natural gas), and the plant's operational load.
He contended that the implementation of the GH?100 per tonne CO2 levy would result in an approximate GH?0.0362 rise in the cost per kWh for energy customers. This figure is applicable to the entire energy landscape.
He stated that, taking into account the CO2 content imbedded in the natural gas volume necessary for 1 MWh, the levy for 362 kg of CO2 will amount to GH?36.2 for 1 MWh of generated power, given that the emissions levy per kilogram of CO2 will be GH?100 for 1,000 kg (or 0.1 GH?/kg).
Also, he stated that the additional cost per kWh, or charge per kWh, is GH?0.0362, or GH?36.2 / 1,000 kWh, when translated to consumer units.
He did, however, draw attention to the computations' inherent simplification and warn that they are based only on average values for a number of factors. He points out that depending on the particulars of the power plant, the grade of natural gas used, and the operational efficiency, the actual emissions and prices could vary significantly.
In order to illustrate the amount of CO2 that a gas-fired power plant emits annually, Dr. Apetorgbor also provided the formula for calculating annual CO2 emissions. "Multiply the power output in megawatts (MW) by the number of hours in a year (8,760) and by the emission factor of 0.231 kg CO2/kWh, assuming the plant operates at full capacity for 24 hours a day, 365 days a year, and using the approximate estimate of 0.231 kg CO2/kWh as an emission factor for natural gas."
The legislation, according to the Power Purchase Agreements (PPAs), "is a political risk (an increased cost event) mitigated by an increased costs clause in the agreements, which suggests a pass-through mechanism whereby economic consequences go to the end-user," the Chamber bemoaned in a previous statement.
As per Dr. Apetorgbor, the cost of producing electricity is expected to rise because of the recent legal modification that imposes a legal duty on power producers. According to him, power plant management and operation are cost-sensitive, much like the downstream petroleum industries.
He said, "In particular, the levy will be added to the operational costs build-up of the power plants," and that "an equal measure of review for the electricity generation tariff is necessary to ensure predictability of cash flow for the power producers to ensure the implementation of the Emissions Levy Act, 2023."
He stated that this change is necessary to maintain operational sustainability and reliability in order to offset the higher operating costs brought on by the implementation of the Emissions Levy Act 2023 (Act 1112).
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