The Ruacana waterfall on the Kunene River
Namibia’s hard-pressed consumers will receive their first jolt in the price of electricity – 18% – in July. Local power utility Nampower is planning phased-in price hikes to recover the rising costs of imported electricity and to finance an ambitious R18-billion expansion programme.
A region-wide shortage of electricity and the need for a massive investment to develop its own generating capacity could result in the price of electricity increasing from 65c a kilowatt hour (kWh) to R1.30/kWh by 2016, according to Nampower chief executive Paulinus Shilamba, who was speaking at a mining conference last week.
Namibia, because of its relatively small economy and lack of industrial development, has been able to avoid the rolling blackouts that have plagued neighbouring South Africa. Eskom supplies about 70% of the total regional capacity, but supply problems in South Africa have now started to affect its regional clients, Nampower said.
Peak demand in Namibia amounts to 511MW, of which 46% is generated by the Ruacana hydro-electric power station on the Angolan border, an ageing coal-fired plant in Windhoek and two smaller diesel-powered plants in Walvis Bay.
The balance is imported under the Southern African power pool arrangement. About 42% of this is sourced from Eskom and the balance come from the Zimbabwe Electricity Supply Agency (39%) and the Zambian Electricity Supply Commission (19%).
Uncertainty
But, Shilamba said, the supply agreement with Zimbabwe would expire in 2014 and uncertainty over whether Eskom could supply additional electricity to Namibia means the country faces a potential shortfall of 150MW by the end of 2013.
Only two days after her warning, the Namibian Electricity Control Board, which sets the bulk tariff prices that Nampower can charge local municipal councils and large consumers, announced a hike that amounts to nearly three times the inflation rate.
Siseho Simasiku, chief executive of the control board, said it was necessary to avoid future price shocks and that the proposed increase was in line with a 2005 Cabinet resolution that the price of electricity had to reflect costs. The initial hikes were delayed because of the 2008 financial crises, but the need to increase Namibia’s own generation of electricity and expand its infrastructure means a price hike could no longer be delayed, Simasiku said.
It has not come as a surprise, but the timing could not have been much worse. The global economic slowdown is expected to impact heavily on the country’s small but vital mining sector.
Two new uranium mining projects, Swakop Uranium’s Husab Project and Areva’s Trekkopje, are to be developed over the next two years.
Investment phase
“The hike was no surprise, coming as it did during an investment phase cycle in the mining sector,” said Namibian economist Robin Sherbourne.
But the price hike posed questions for the government, which wanted greater returns from the mining sector because more expensive electricity was bound to have a negative impact on operations such the Scorpion zinc mine and Weatherly’s copper smelting operations, Sherbourne said.
Scorpion alone accounts for about one-third of Namibia’s total electricity consumption and a sharply increased electricity bill could make the mine, eyed by international commodities giant Glencore, less attractive as an investment, other analysts said.
But the price hike might also open the door to independent power producers. The regulator’s chairperson, Jason Nandago, said in his annual report that the board had granted nine conditional licences to would-be players in the field, who hoped to take advantage of Namibia’s abundant solar and wind energy resources.
Nampower also has huge ambitions to become a regional electricity supplier. To address growing demand from the mining sector, it is planning a 300MW coal-fired plant at Arandis, to be commissioned by 2015.
Fourth turbine
Other plans include the long-stalled Kudu gas field off the coast to supply a 800MW gas-fired plant and the construction of the 300MW Baynes hydroelectric scheme on the Kunene River below the Ruacana plant.
Next month, Nampower will commission a fourth turbine at Ruacana that, with the refurbishment of the older turbines, will boost capacity to 334MW. But reduced seasonal water flows, owed largely to the damaged Gove Dam at Huambo in Angola where the Cunene River rises, means that the actual output remains at less than 50% of capacity.
The company also has plans for two solar and one wind energy plants and has arrangements in place to lease diesel generators that would make up the most critical shortfalls in the coming winter months, Shilamba said.
Just how feasible these projects are remain to be seen. There has been no real progress in the development of the Kudu gas field since it was discovered in the 1970s and opposition from environmentalists and foot-dragging by the Angolans has stalled the Baynes project since 2004.
Consumer lobbyist Milton Louw said this was cold comfort for the hard-pressed Namibian consumers, who were reeling under escalating living costs, as well as smaller town councils, which were struggling to pay their electricity bills.
“As always, it is the poorest consumers who are going to be impacted most by these increases,” he said.