Ghana’s Parliament has gazetted a sweeping legislative instrument requiring all future power purchase agreements to undergo competitive bidding, marking what officials describe as a fundamental shift in how the country procures electricity generation capacity.
The Energy Commission (Planning and Competitive Procurement of Additional Electricity Generation Capacity) Regulations, 2025 (L.I. 2508) represents a major policy shift aimed at enhancing transparency, reducing electricity costs and attracting private sector investment.
The gazette, published last week, ends decades of sole-sourcing practices in Ghana’s power sector. Under the new framework, all power purchase agreements (PPAs) must follow open, competitive procurement processes designed to deliver better value for consumers while maintaining reliable electricity supply.
Energy and Green Transition Minister John Abdulai Jinapor framed the reform as transformative for Ghana’s electricity sector. “This reform marks a new era for Ghana’s power sector,” he stated. “Competitive bidding will not only ensure value for money but also unlock innovation and greater private sector participation.”
The legislation arrives against a backdrop of mounting financial pressure. The total energy sector debt as of the end of March 2025 stands at $3.1 billion, including debts owed to Independent Power Producers (IPPs), State-Owned Enterprises (SOEs), fuel suppliers and other stakeholders.
Power generation accounts for approximately 65 percent of total costs in Ghana’s electricity value chain. By introducing competitive procurement, policymakers aim to address cost inefficiencies that have contributed to the debt accumulation while improving overall sector performance.
The minister emphasized alignment with President John Dramani Mahama’s vision for affordable, reliable electricity capable of supporting industrial growth and economic transformation. Without competitive bidding mechanisms, Ghana has historically relied on negotiated deals that critics argue lacked transparency and cost discipline.
Implementation of L.I. 2508 involves strengthening regulatory institutional capacity. The Energy Commission will enhance its vetting procedures for license applications and maintain a comprehensive, up-to-date PPA register to improve transparency and oversight across the sector.
The ministry has also secured partnerships with international development institutions to support the transition. The World Bank, African Development Bank (AfDB), and Energy for Growth Hub are collaborating to standardize power purchase agreements, build local capacity in PPA design and negotiation, and ensure balanced returns for investors.
These partnerships aim to create frameworks that deliver high-quality electricity at competitive prices while providing fair returns that attract serious private sector investment. The standardization effort addresses concerns that previous PPAs sometimes favored generators over consumers or lacked clarity on key terms.
The new policy framework is expected to foster innovation, reduce costs, and create an attractive environment for investment, as Ghana works toward a resilient and sustainable energy future.
For potential investors, competitive bidding provides clearer entry pathways into Ghana’s electricity market. Rather than navigating opaque negotiation processes, companies can now compete on transparent criteria including technical capability, pricing, and project viability.
The reform also addresses long-standing concerns about capacity payments under existing PPAs. Some agreements required payments to generators regardless of whether their power was needed, contributing to the sector’s debt accumulation. Competitive procurement allows Ghana to better align generation capacity with actual demand.
However, implementation challenges remain. Building technical capacity within regulatory bodies to effectively manage competitive bidding processes will take time. The Energy Commission must develop robust evaluation criteria, ensure fair competition, and prevent gaming of the system.
Questions also persist about how the new framework will interact with existing PPAs, many of which extend years into the future. While L.I. 2508 applies to future agreements, Ghana still faces obligations under current contracts that weren’t competitively procured.
The legislation represents part of broader efforts to reform Ghana’s energy sector amid persistent financial strain. Beyond competitive procurement, the government has introduced measures including an energy sector levy aimed at debt reduction and operational sustainability.
Whether competitive bidding delivers promised cost savings and efficiency gains depends largely on execution. Successful implementation requires not just legal frameworks but sustained political commitment, regulatory competence, and genuine competition among potential power generators.
For Ghanaian consumers and businesses, the ultimate test will be whether electricity becomes more affordable and reliable. If competitive procurement achieves those goals while reducing sector debt, it could provide a model for other African countries grappling with similar challenges.
Source: newsghana.com.gh
