United Nations Environmental Programme (UNEP) Frankfurt School of Finance & Management In collaboration with Ecobank Transnational Incorporated (ETI) African Green Business Market Assessment Ghana Country Study Nairobi, 21 April 2010 Content 1 Market Environment for Green Businesses ......................................................................................................................... 1 1.1 Country background......................................................................................................................................................... 1 1.1.1 Macroeconomic Environment ............................................................................................................................... 1 1.1.2 Financial Sector .................................................................................................................................................... 1 1.1.3 Business Environment ........................................................................................................................................... 1 1.2 Energy Sector Overview ................................................................................................................................................... 2 1.2.1 Primary Energy Supply Balance .......................................................................................................................... 2 1.2.2 Final Energy Consumption Balance ..................................................................................................................... 2 1.3 Potential for Renewable Energy and Energy Efficiency ............................................................................................... 5 1.3.1 Renewable Energy Sector ..................................................................................................................................... 5 1.3.2 Energy Efficiency Sector ....................................................................................................................................... 6 1.4 Institutional Framework................................................................................................................................................... 7 1.4.1 Institutions ............................................................................................................................................................ 7 1.4.2 Industry Bodies ................................................................................................................................................... 10 1.4.3 Laws and Codes .................................................................................................................................................. 10 1.4.4 Guidelines/Energy Policy .................................................................................................................................... 13 2 Market Size and Composition of the Green Business Sector .......................................................................................... 17 2.1 Renewable Energy (Energy Production) ....................................................................................................................... 17 2.1.1 Solar..................................................................................................................................................................... 17 2.1.2 Hydro ................................................................................................................................................................... 19 2.1.3 Biogas .................................................................................................................................................................. 20 2.1.4 Biofuel ................................................................................................................................................................. 21 2.1.5 Wind .................................................................................................................................................................... 22 2.1.6 Market Trend in the RE sector ......................................................................................................................... 23 2.2 Energy Efficiency ............................................................................................................................................................ 24 2.2.1 Production ........................................................................................................................................................... 24 2.2.2 Transmission and Distribution ........................................................................................................................... 24 3 Financing Green Businesses in Ghana .............................................................................................................................. 27 3.1 Financial Services Industry for Green Businesses ........................................................................................................ 27 3.1.1 Government Budget and Incentives .................................................................................................................. 27 3.1.2 Development Partners (Technical Assistance and Funds) ................................................................................ 27 3.1.3 Carbon Finance ................................................................................................................................................... 30 3.1.4 Financial institutions .......................................................................................................................................... 31 3.2 Green Business Demand for Financial Services ........................................................................................................... 33 3.2.1 Business Demand for Financial services ........................................................................................................... 33 3.2.2 Consumer demand for financial services .......................................................................................................... 33 3.3 Financing barriers .......................................................................................................................................................... 34 3.3.1 Barriers for Financial Institutions Investing in Green Businesses in Ghana ................................................. 34 3.3.2 Barriers to Accessing Finance by Green Businesses ........................................................................................ 35 4 Conclusions: Capacity Building and Financial Mechanism ............................................................................................... 36 4.1 Capacity Building on the National Level ..................................................................................................................... 36 4.2 Capacity Building on the Financial Institution Level .................................................................................................. 36 Africa Green Business Market Assessment – Ghana Page i 4.3 Financing Mechanisms on the National Level ............................................................................................................. 37 4.4 Financing Mechanisms on the Financial Institution Level .......................................................................................... 37 4.4.1 Micro Firms ......................................................................................................................................................... 37 4.4.2 SME ...................................................................................................................................................................... 38 4.4.3 Large Enterprise/Corporate ................................................................................................................................ 38 4.4.4 Financing Mechanism on the National and Financial Institution Levels ....................................................... 38 Annex 1 Contact List Annex 2 Renewable Energy Project Profiles Annex 3 Energy Efficiency Activity Profiles Annex 4 Donor Projects Annex 5 GEDAP Annex 6 Ghana policy scenarios: RE Quota / Public Benefit Fund / CDM Africa Green Business Market Assessment – Ghana Page ii 1 Market Environment for Green Businesses 1.1 Country background 1.1.1 Macroeconomic Environment Ghana has made considerable progress in laying the foundation for sustainable growth and poverty reduction through steady reforms since the mid-1980s, resulting in per capita output growth averaging 1.6% per annum and increased private sector activity. Under the NPP government (2000 – 2008), the rate of inflation declined as a result of im- proved fiscal and monetary management, debt relief, structural reforms and a supportive international environment. However, in view of internal and external factors including the 2008 national elections, the African Football Cup, rising global food and oil prices, the fiscal deficit rose to 14.5% of GDP and inflation increased from 10.9 percent in 2006 to 18.1% in 2008. The Ghanaian Cedi which was denominated only in July 2007 depreciated by 50 percent against the dollar, and official reserves fell to 2 months‟ import cover. Yet, at the same time, Ghana‟s economy grew at a two-decade high of 7.3% based on persistently strong credit expansion
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