Ghana’s 2026 energy budget risks failure without key reforms – ICEG warns
Power station, electrical power plant facility industry. Power station for making high voltage electricity.
The Institute of Climate and Environmental Governance (ICEG) has expressed serious concerns regarding the energy proposals outlined in the 2026 Budget Statement, describing them as shortfalls that could negatively impact the sector.
While commending the government’s efforts to ensure energy security, the Institute cautioned that many of the proposed measures may serve as temporary solutions rather than addressing the fundamental issues crippling the sector.
In a statement issued on Monday, November 17, the Policy Lead for Climate Finance and Energy Transition at ICEG, Kwesi Yamoah Abaidoo, emphasized that rooting out underlying technical problems within the energy sector were key to the sector’s overall health.
“Although these actions keep the lights on, they don’t fix the underlying technical issues, which include weak grid infrastructure, inefficient plants, high system losses, and outdated metering,” it said.
ICEG pointed out that certain short-term financial strategies such as clearing arrears, restoring letters of credit, and settling unpaid invoices might provide temporary relief but do little to resolve ongoing technical and operational shortcomings.
The institute raised alarms about the justification for a 1,200 MW state-owned thermal plant under the GPP-2 project, arguing that Ghana’s current installed capacity already surpasses demand growth. This, it said, could lead to long-term foreign exchange risks and stranded assets associated with committing to aging thermal infrastructure.
It further challenged statements made in the budget on the potential for domestic gas to cut generation costs by 75%, highlighting that inefficiencies in thermal plants, along with processing fees, transportation costs, and dollar-denominated contracts, render this estimate too optimistic.
On the limitations of the Cash Waterfall Mechanism (CWM), ICEG noted that although the budget projects an increase in revenue declarations from GH¢950 million to GH¢1.7 billion, this mechanism only redistributes revenue without enhancing operational efficiency or guaranteeing debt recovery from independent power producers (IPPs).
The Institute further raised concerns about the Private Sector Participation (PSP) process for the Electricity Company of Ghana (ECG), suggesting that its impact may be limited without clearly defined technical and commercial performance indicators such as feeder reliability, loss reduction, and collection efficiency.
According to ICEG, the 2026 budget statement prioritizes thermal assets while falling short in investments for renewable energy and advanced infrastructure, areas it said are both critical for diversifying Ghana’s energy mix.
To bridge these gaps, the Institute proposed several reforms including a performance-based CWM, a foreign exchange hedging policy for gas contracts and IPP payments, and a structured PSP framework with measurable key performance indicators (KPIs).
“ICEG believes that incorporating these recommendations into the implementation scheme will enhance efficiency and ensure value-for-money in these initiatives earmarked for 2026,” the statement added.
See Full Statement Below:
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