Billions required as darkness nears

The frantic search for capital involves all in the region ‘ both energy exporters like Zambia and Mozambique, and energy importers like Zimbabwe, Namibia and Botswana. And the sums being talked about are truly huge. Both Zimbabwe and Zambia are talking about US$2 billion each, almost 10 percent of Zimbabwe’s gross domestic product and a whopping 40 percent of Zambia’s. There is no way either country can find that sort of money within its own boundaries and it would be difficult to borrow so much on international markets. Thus the search for partners and investors. Zambia’s Energy and Water Development Minister, Felix Mutati, said the US$2 billion being sought was a serious challenge that needed concerted effort by the government in partnership with the private sector to meet the demand locally and in the region through the Southern African Power Pool (SAPP). Regionally, Mutati said an average 1,100 kilowatts of power was needed to meet consumption, a situation he said needed to be addressed to avoid the region plunging into darkness. “We need to join hands and find a solution to the looming power shortage but the question is how to attract the private sector so that the money we require is mobilised,” he said. He bemoaned the dilapidated equipment being used by the electricity utility company, which needs rehabilitation to meet the demand of consumers. World Bank Country Manager, Ohene Nyanini, noted that the private sector was cardinal in mobilising US$2 billion to avert a blackout in Zambia and the region. “The question is how do we mobilise these resources without the private sector? This is the greatest challenge we face today and unless we put our efforts together in partnership with the private sector, we are at risk of plunging into a blackout because of the deficit,” he said. Speaking during the Zambia Power Market and Growth Prospects Export Potential and Zesco Power Development Programme in the Zambian capital, Lusaka recently, Zesco Managing Director Rhodine Sisala said his firm was ready to offset the projected power deficit both in Zambia and the region through various projects. Sisala said Zesco had identified Kafue Gorge lower with a capacity 75 megawatts, Itezhi-Tezhi-120 megawatts and Kariba North Bank extension, 360 megawatts for immediate development. He said Kalungwishi Hydro with a capacity of 164 megawatts; Batoka Gorge Hydro 1,600 megawatts and Luapula River Hydro with 950 megawatts would be requiring development in due course. In addition to the rehabilitation projects, Kafue Gorge would be upgraded to 990 megawatts from 900 megawatts and Kariba to 730 megawatts from the current 600 megawatts it supplies. “In 1992 we made an attempt to develop new hydropower stations but the private sector failed to rise to the challenge,” he said. He said in 2003, the government, through Zesco had initiated another strategy to develop the power stations in partnership with Iran and China. A letter of intent had since been signed between the governments of China (Sino hydro) and Zambia to facelift the Kafue Gorge Lower. A Memorandum of Understanding had also been signed between Zesco to develop the Kafue Gorge Lower project and re-assessment of technical, environmental, economical and financial viability of the project,” said Sisala. The Kariba Gorge Lower had been estimated to cost US$ 750 million while the Kariba North Bank extension is estimated to cost US$ 320 million once undertaken. The Zambian government, Zesco and China’s Sino hydro have signed a MoU. Detailed engineering designs are yet to be done. Zambia and Iran had facilitated the partnership between Zesco and FARAB to develop the ITT project On the Ithezi Tezhi Hydropower. The ITT project including the transmission line has been pegged at a cost of US$ 150 million. Mutati also bemoaned high electricity tariffs that were frustrating direct foreign investment in the energy sector. He said the 12 per cent slapped in tariffs on commercial electricity users was the highest compared to other countries in the Southern African region and was hindering investment in the sector. He said the tariffs needed to be reviewed. Mutati said although the utility company, Zambia Electricity Supply Corporation (ZESCO) was striving to meet the supply demands at home and within the region, the high tariffs needed to be reviewed to make the company competitive and attract investment in the sector and further meet the demand in the region. “The tariffs are relatively high in Zambia when you compare to other countries in the region and we need to review it to attract direct foreign investment in the sector,” he said. Mutati also said about 40 per cent of the 11 million Zambians had no access to electricity because of lack of adequate equipment to meet the demand. The Zimbabwe Electricity Supply Authority is looking for a similar sum to boost capacity at Kariba South and nearly double the size of its large thermal station at Hwange, a project that requires new coal mines, which Zesa is prepared to open and run should the money be found, as well as more generation capacity. Chinese and Indian power and mining companies have already expressed interest in investing in joint ventures to provide this extra capacity and Zimbabwe has restructured Zesa to allow non-Zesa investment in generation while retaining total state ownership of the national grid. A second large thermal station is planned for Gokwe, where there is another huge coal field but before that is developed a gas turbine station at Lupane, using methane from Southern Africa’s largest coal-gas find, will be commissioned. Like Zambia, Zimbabwe is very keen on building the third big dam on the Zambezi, at Batoko Gorge just down stream of Victoria Falls. This scheme, to work really effectively, requires the proposed expansion of both Kariba stations first. Batoko will not have much storage capacity, hence the minimal environmental impact of the lake, and the dam will do little more than create a large drop for the power stations. When the river is in flood Batoko will need enough generators to take the bulk of the combined Batoko-Kariba load while the cast Lake Kariba is allowed to fill, with its power stations being run at little more than half capacity. When the Zambezi flow is low, and Batoko does not have enough water to run flat out, Kariba will take over the bulk of the load, running down the lake level. The idea of managing the four power stations on the two lakes as a group for maximum advantage can be extended to include Cabora Bassa in Mozambique and the actual and proposed stations on the Kafue, the Zambezi’s largest tributary. Such careful management would allow the power station at Cabora to be doubled in size since the bulk of the water going through those generators would have already gone through two other power stations and it would be possible to have a far more even flow into the lake than an unmanaged Zambezi provides. Cabora Bassa has only recently passed from Portuguese to Mozambican majority ownership, although Mozambique has yet to make full payment for its new shares. In the end Portuguese equity will sink to 15 percent and there have been persistent reports that Zimbabwe would like to buy into the scheme, taking up about a quarter of the shares, such an investment being less than building another new power station from scratch. Power experts have noted that all three countries involved – Zambia, Zimbabwe and Mozambique – can gain maximum returns on their huge investments in Zambezi basin hydro schemes if they are able to co-operate in tightly managing what would amount to something like the US Tennesse Valley Authority, although on a larger scale. Other regional schemes also have plans already on the shelf. Namibia and Angola have plans to expand an existing scheme on the Cunene and to build a new one. South Africa has plans for a second nuclear reactor as well as more of its highly innovative air-cooled thermal stations. The DRC, owners of the best hydro sites in the world, have plans that could double SADC’s generating capacity with a single new power station at Inge rapids between Kinshasa and the coast. Most of the plans to expand existing stations and build new ones are more than 20 years old. They have never been implemented for two reasons. First South Africa developed its new giant thermal stations, mothballing older stations. That gave some extra capacity when these were brought back on line. Secondly the creation of the Southern Africa Power Pool in 1995, and the building of a true regional grid largely centred on the biggest regional importer, Zimbabwe, allowed existing capacity to be used far more efficiently. It is now very easy, for example, for South Africa to import power from as far away as the DRC, running the supplies through the DRC-Zambia, the Zambia-Zimbabwe and the Zimbabwe-South Africa inter-connectors plus sections of the DRC, Zambian and Zimbabwean grids. Such efficiencies allowed rates to stabilise or even drop in real terms. Now it appears that everything that can be wrung out of the existing capacity has been wrung out, and new, and expensive, power stations will just have to be built to keep the regional grid supplied. But power experts warn that the investments required will send rates rocketing unless the co-operation that saw the power pool become such a success is extended to planning a sensible programme of generation addition, with each new station coming on line just in time. Having vast surpluses of extra capacity from brand new stations would be very inefficient.

May 2006
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