What’s Going on in Ghana with its Nuclear Tender?

A recent wire service report from an African news media source implied that China has won the business of building Ghana’s first full size nuclear power plant by providing its 1,100 MW Hualong One PWR. In point of fact this is not the case.

What appears to be reported, albeit poorly, is that Ghana’s Energy Minister Matthew Opoku Prempeh made an announcement on his Facebook page that he had accept a proposal from China National Nuclear Corporation to build the reactor. News with this kind of significance usually comes directly from a government ministry.

Further, Stephen Yamoah, executive director of Nuclear Power Ghana (NPG), who holds a PhD. in nuclear engineering, is in charge of the tender, not Prempeh. This week Yamoah told the Semafor Africa a target to build Ghana’s first plant by 2030 would be missed because “we still haven’t settled on a vendor.” Construction, which is expected to last five years, is due to begin in 2026.

Ghana’s roadmap for nuclear power originally called for work to start on a new reactor by 2024 and to commission it by 2030. See also a 2020 briefing on the overall structure of Ghana’s nuclear program including safety/regulation and stakeholder engagement.

In September 2021 Ghana government officials said that five vendors – from the US, Russia, Canada and South Korea – had responded to a request for expressions of interest issued to help the country build its first plant. The expectation was at the time that a contract would be signed for a 1 GWe plant sometime in 2024/2025. In September 2023 NPG announced that it selected Nsuban in Ghana’s Western Region, a coastal site, as its preferred nuclear power plant location, with Obotan, an inland site in the Central Region, as a backup site.

Yamoah told Semafor the winner of the ongoing bidding process will be announced at the end of 2024 by outgoing president Nana Akufo-Addo. Ghana is expected to hold a presidential election in December and one of the key issues of the campaign is that the government is not doing enough to provide reliable electricity to the nation.

Semafor reported that while electricity generation and access have improved in the country in the last decade, inefficiencies in electricity distribution and high demand are causing major shortfalls in power supply. That has led to frequent, prolonged power cuts which Ghanains have endured since last year.

The wire service said that Ghana is projecting that nuclear energy will make up 5% of the country’s energy mix by 2030 and 35% by 2070, according to Dr. Robert Sogbadzie, deputy director of power at the Ministry of Energy.

“Every country is coming in based on its proposal,” he said, stressing that the cost and technology used will be the determining factors, rather than solely politics.”

World Bank Assessment of Ghana’s Economy

Ghana is also reported to be considering small modular reactors as an affordable option. The reason for looking hard at the economics of nuclear power is that Ghana’s economy is in dire condition. According to the World Bank, in its most recent assessment of Ghana’s finances, the multilateral lending body wrote;

“Persistent challenges remain, notably characterized by elevated inflation, subdued growth, and substantial pressure on public finances and debt sustainability.

Ghana is in debt distress and public debt is unsustainable. In response, the Government has embarked on a comprehensive debt restructuring, a significant fiscal consolidation program, and the implementation of reforms to foster economic stability and resilience.

The crisis has taken a toll on the pace of economic growth – which decelerated to an estimated 2.9% in 2023 and is projected to remain weak in 2024.

Critical reforms include strengthening the insolvency regime, access to finance, the energy sector, and the legal and regulatory environment faced by foreign direct investors.”

Due to the ongoing economic perils, Ghana may be forced to choose between the economies of scale of large-scale nuclear power plants and the affordability of small modular reactors (SMRs).

US has an MOU Under its FIRST Program

The US has an MOU with Ghana signed in 2021 focusing on cooperation and Ghana’s involvement in the State Department’s FIRST program. This could open doors for US technology vendors like TerraPower GE Hitachi Nuclear Energy X-energy NuScale Power and Westinghouse Electric Company in the future.

Ghana has participated in the Foundational Infrastructure for Responsible Use of Small Modular Reactor Technology (FIRST) capacity building program, since 2022. FIRST supports Ghana’s leadership in the region on moving towards SMR deployment.

In September 2023 U.S. Principal Deputy Assistant Secretary of State for International Security and Nonproliferation Ann Ganzer joined Ghanaian counterparts to announce further U.S. support for establishing Ghana as a Small Modular Nuclear Reactor (SMR) Regional Training Hub and center of excellence for the sub-Saharan African region.

The $1.75 million in funding will support Ghana’s nuclear workforce development, including the provision of an SMR control room simulator, university partnerships, and academic exchanges to position Ghana to serve as a regional training hub for nuclear power technicians and operators.  Through this partnership, Ghana will be positioned to develop a skilled nuclear workforce for the region consistent with the highest international standards of nuclear safety, security, and nonproliferation.

Other Issues Also Loom Large

Another issue facing Ghana’s nuclear program, according to the Semafor report, is that the rate structure for paying power producers is inefficient in terms of the rates of return work against implementing a massive capital investment in a nuclear power plant. Power producers have complained of not being paid fairly for the electricity they supply to the grid.

While all this is going on, in neighboring Burkina Faso Rosatom recently signed an agreement to explore providing that country with a nuclear power plant. Significantly, Ghana, which had been exporting electricity to Burkina Faso, recently cut its exports of electricity to that country in order to allocate the power for domestic users in Ghana.

If a Deal Looks Too Good to Be True . . .

What all African countries face in dealing with Russia and China is that while these countries offer favorable terms to finance the projects, paying back the billions in cost would add to already unsustainable debt burdens.

Even in the case of Egypt, where Rosatom is financing 85% of the costs, Egypt is having issues covering its share of the $60 billion project (four 1,200 MW VVER light water reactors). The totals costs include fuel for the reactors over their 60-80 year service lives, fees to send the spent fuel back to Russia, and grid improvements to deliver electricity to customers.

China’s Belt and Road program, which has built significant energy and transportation infrastructure for multiple countries, has also saddled these nations with significant debt obligations. According to a report by the Wilson Center, a DC think tank, ten years into the Belt and Road Initiative (BRI), 80% of China’s government loans to developing countries have gone to nations in debt distress.

A controversial case is the debt default by Sri Lanka in 2022 of $50 billion owed to China and other creditors for infrastructure improvements to its port facilities. A year later the US announced it would invest $553 million in Sri Lanka’s Port Columbo as a direct competitive response to China’s BRI effort.

In short, low interest financing by Russia and China may look attractive to the challenging issues facing Ghana’s economy, but in the long term the outcomes may not be to Ghana’s advantage to build full size nuclear power plants.

It is not clear from this case how much, if any, financial assistance in the form of grants or loans the US would extend to Ghana for its nuclear energy program. In April 2023 in Poland the U.S. Export-Import Bank and U.S. International Development Finance Corporation signed letters of interest to lend up to $3 billion and up to $1 billion, respectively, to the Orlen Synthos Green Energy project.

It’s aims is to develop around 20 small BWRX-300 modular reactors designed by GE Hitachi Nuclear Energy. Building a fleet of 20 SMRs could produce economies of scale to reduce to cost per unit to about $3,500/Kw according to an estimate from GE-Hitachi.  Using that number, a fleet of 20 300MB SMRs would cost about $1.1 billion each or, in round numbers, between $21 and $24 billion for the entire project.

However, Ghana, while considering SMRs, has not made a decision to build them. At current global costs benchmarks of $5,000/KW, a 1,200 MW reactor would cost $6 billion. The figure doesn’t include substantial improvements to the regional grid and long terms fuel costs.

By comparison, a single 300 MW SMR would cost $1.5 billion. Once in revenue service, it could help pay for a second SMR, and so on, making the path forward to stabilizing Ghana’s electric power situation more affordable on “pay as you go” program.

Prior Coverage on this Blog – Ghana Reports Strong Vendor Interests in its Nuclear Plan

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