Uncertain Future: lack of generation threatens security

Windhoek – Namibia’s electricity supply situation will become much more tenuous from 2014 when a 150 MW power supply deal with Zimbabwe’s ZESA comes to an end, heightening power supply insecurity in a country which only generates around 360 MW.
Namibia’s national utility, NamPower says it has managed to negotiate an extension of the contract with ZESA ‑ signed in 2007 for a guaranteed supply of 150 MW ‑ to 2014, but management remains uncertain whether Zimbabwe, battling rolling blackouts of its own, is amenable to another extension of the contract beyond 2014.
Plagued by under investment in generation capacity, NamPower generates around 360 MW against installed generation capacity of 570 MW.
Electricity demand ‑ currently around 534 MW ‑ far outstrips the relatively low domestic generation.
NamPower MD, Paulinus Shilamba, projects demand to peak to around 800 MW by around 2018.
Local generation is limited with key hydro power station, Ruacana, only generating half of its installed 375 MW, a setback attributed to low water levels in Ruacana during dry spells.
Van Eck, a coal-fired power station situated north of Windhoek, Namibia’s capital, has been off the grid for the past two years.
Shilamba said that NamPower is rehabilitating Van Eck at a cost of R300 million, but even after getting back on the grid, the power station is still costly to run due to the fact that Namibia is a net coal importer.
NamPower has managed to stitch together a raft of short- to medium-term power supply deals and will also lean heavily on neighbouring countries for electricity imports, through the Southern African Power Pool (SAPP) energy trading mechanism in the coming years.
NamPower hopes that by 2018, its power generation capacity would be boosted by the commissioning of a new base load power station, but then, even management does not speak confidently on the stability of supply after 2018.
In the interim, the end of the ZESA contract and another 90 MW supply deal with Aggreko of Mozambique, which ends in 2015, raises power security fears for a country battling to grow its narrowly diversified economy.
Shilamba said that NamPower faces another challenge when its contract with Eskom of South Africa ends in 2016.
While the contract with Namibia’s largest trading partner will in all likelihood be renewed, Shilamba said that “the future is not certain” and urged government to help the utility find a lasting solution to the insecurity of power supply.
“Our installed generation capacity is 570 MW but current generation is around 360 MW. Demand is currently around 534 MW and this means we are not in a position to satisfy demand. Our biggest challenge is that the capacity at Ruacana is not continuous due to the seasonal nature of the river (Ruacana),” Shilamba said.
“Ruacana only generates 100 percent during the wet season -basically we can’t satisfy demand and the situation will be worsened by the expiry of the contracts we have with ZESA in 2014 and Aggreko in 2015,” Shilamba added.
“Our bilateral 10-year agreement with Eskom (South Africa) is also expiring in 2016 and we don’t know if Eskom will extend this contract,” Shilamba added.
Eskom has warned of ‘tighter supply’ during the 2013 winter season, stoking fear in the entire southern African region, which relies heavily on the South African utility for electricity.
Shilamba refused to shed light on whether NamPower would still be able to secure supplies from Zimbabwe’s ZESA.
“It depends on many factors, but from our side we know that it’s not going to be easy – I don’t know if they (ZESA) will be happy to extend the contract when they are having problems of their own,” Shilamba said.
The utility said it might resort to installing large-scale electricity diesel generators, which Shilamba, however, admits “come at a very high cost”.
Namibia’s electricity supply insecurity problems would be resolved if it manages to bring the long delayed Kudu gas to power project, which it is envisaged, has potential to generate upwards of 800 MW.
NamPower is under severe pressure from government to fast track Kudu, a project which involves pumping gas from the massive Kudu fields in south-western parts of the country to a planned 1 050 MW plant.
After years of dithering on thee Kudu project, NamPower now says it hopes the gas-to-power plant could be running by 2017, and power off-takers will be Eskom, Zambia and other electricity starved countries in the region.
To finance the US$1.2 billion project, NamPower will sell a 49 percent stake in Kudu power, in a capital equity swap deal likely to rope in Copperbelt Energy Company of Zambia (CEC) and another unnamed investor.
CEC has also expressed interest to buy 300 MW from the planned Kudu, Shilamba said.
“We are confident that this time around, the Kudu gas-to-power project development is set to come to fruition noting the level of strategic support that has been received from the Namibian government. At political level, there is indeed keen interest and support as demonstrated by the pronouncements that were made recently in the National Assembly about Kudu during the Appropriation Bill deliberations,” Shilamba said.
He said that Kudu is a national project and should be supported by all stakeholders ‘as the benefits to derived thereof are geared towards stimulating the national economy through adequate power supply as well as the commercialisation of oil and gas resources in Namibia’.


May 2013
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