LMI Holdings to install 1,000 MW of solar in Ghana by 2032

From the newsletter

Ghanaian firm LMI Holdings has partnered with the International Finance Corporation (IFC) to develop a 150 MW solar plant for the Tema and Dawa Special Industrial Zones. IFC will provide a $100 million loan facility to Solar for Industries Limited (SFI), a newly formed subsidiary of LMI Holdings Ltd to support the Group’s plan.

• The project will be done in two phases. The first 100 MW phase is scheduled for completion by October 2026, with an additional 50 MW to be completed by June 2027. LMI Holdings plans to reach 1,000 MW installed solar capacity by 2032.

• Once completed, the SFI project will power 100 businesses across various industries. It will reduce carbon emissions by about 120,000 metric tonnes annually and help reduce energy costs.

More details

• The commercial and industrial (C&I) sector in Ghana experienced steady consumption growth between 2019 and 2022, with a Compound Annual Growth Rate (CAGR) of 13.49%. Traditional grid electricity has become increasingly expensive, with industrial customers facing the highest per-unit costs, with tariffs doubling since 2019. This escalating cost has made captive solar installations (installed solar power for own consumption) a financially attractive alternative for C&I customers, as they can realise savings of 5-30% on their energy bills.

• The 2024 energy outlook from the Energy Commission Ghana (ECG) predicts a continued rise in electricity costs due to expected fuel supply challenges, further solidifying the economic viability of captive solar. This has led many companies to explore renewable energy sources, particularly solar power. Multinational companies like Guinness Ghana Breweries Limited and Cargill have already embraced solar power, installing 1.1 MW and 565 kW captive solar plants, respectively, to reduce their reliance on the grid and cut emissions.

• The market has also attracted many solar developers. Some solar developers, like AB Solar, with over 4,400 MW of installed capacity and a further 3,120 MW in the development phase, highlight the massive market potential. The IFC has previously financed LMI Holdings to construct a 16.82 MW rooftop solar PV plant in Ghana's industrial zones.

• Ghanaian government policies have been key in making the market attractive. The government offers various tax incentives to encourage investment in renewable energy, including import duty exemptions on renewable energy equipment and machinery, income tax holidays for renewable energy companies, and tax exemptions on income from carbon credit sales. 

• On top of this, its geographical position makes it ideal. Receiving 1,800 to 3,000 hours of sunshine annually, the country possesses a natural advantage in harnessing solar power.

• The government also introduced an emission levy of $6.5 per tonne per month on carbon-intensive industries. The levy, implemented in January 2024, targets sectors such as manufacturing, mining, oil and gas, electricity, and heating, making solar power a more financially attractive option due to potential cost savings on emissions and tariffs.

Our take

• Energy companies usually struggle to finance renewable energy projects due to the high initial cost required for equipment. The partnership between IFC and LMI Holdings solves this problem. The IFC has a large pool of resources and can easily finance big projects or provide loans to finance them.

• The Ghanaian solar market is expected to register a compound annual growth rate (CAGR) of greater than 20% during the forecast period (2025-2030). This is an opportunity for energy companies to exploit. At the same time, the IMF is pushing for Ghana to increase its electricity costs to enable it to be profitable by charging cost-reflective tariffs. Commercial and industrial customers' energy costs will increase, and they will seek alternatives in cheaper renewables.

• Additionally, introducing an emission levy on carbon-intensive industries adds another cost to production. Industries are therefore likely to adopt renewables to cut costs. At the same time, the need to appeal to a global market that's keen on sustainability issues makes it a goal for companies to retain environmentally conscious consumers.