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28 August 2016 00:12 (South Africa)
Business

The deficits behind Zambia’s power problems

  • Greg Mills
    Greg Mills
  • Business
Photo: People watch as the spillway gates are opened at Kariba North Bank dam on Lake Kariba to reduce rising water levels as a measure to protect the dam February 11, 2008. REUTERS/Mackson Wasamunu (ZAMBIA)

The key impediment to Zambia realising its potential for abundant, cheap hydro power has for decades been the government’s inability to take decisions in the national interest. By GREG MILLS.

The Zambian government has revealed that more than $40-million was spent on importing 148MW of emergency power between September and December.

Plans are afoot to import 200MW from a Turkish power-ship to be moored off Nacala in Mozambique. Zambian Energy Minister Dora Siliya told parliament the country faced a power deficit of 1,000MW, disclosing that the Zambian Electricity Supply Corporation (Zesco) is paying 18.34 cents a kilowatt for these imports, and selling it on at just 5 cents to its domestic customers.

One of Zambia’s big development advantages should be abundant, cheap (and clean) hydro power. It should drive diversification and the word so frequently on politicians’ lips, beneficiation. The problem in realising this advantage is not financing or private sector interest or even water. The key impediment has, for decades, been the ability to take decisions in the national interest.

The estimated demand for power in Zambia has risen from 1,600MW in 2008 to 2,200MW last year, and is anticipated by the government’s own forecasts to reach 2,800MW by 2020. On paper, at least, this is met by current production from nine hydropower stations, principally Kariba North Bank (720MW), Kariba North Bank Extension (360MW), Kafue Gorge Upper (900MW), and Victoria Falls (108MW), along with eight small thermal stations including 50MW from a new plant at Ndola.

Even before this, recognising projected long-term shortages, Zesco contracted an additional 120MW of hydro power from Itezhi-Tezhi on the Kafue River and 270MW of coal-fired power from Maamba in the south of the country.

Now Zambia is producing 1,000MW below its installed capacity, the size of its power deficit. But the reasons behind this point predominantly to acts of interference rather than nature.

For one, there is a chronic lack of commitment to project time frames, a result of political interference and the involvement of narrow interests across successive Zambian governments.

For example, the 750MW Kafue Gorge Lower Hydroelectric project has been on the table since the first administration of President Frederick Chiluba (1991-96), but has been delayed due to the metronomic attempts by various administrations, and political personalities, to position themselves, in the words of one of Chiluba’s ministers, “to chew on the cob”.

The Kafue Gorge Lower contract was recently, finally, awarded to Sinohydro, which reportedly came in $400-million higher than the lowest bid. For Zambians to pay for such expense power, tariffs are rapidly ratcheting up. The proposed new mining electricity tariff of $10.35c is more than double the estimated cost of production, reflecting very high administrative overheads.

Repeated requests for Zesco to produce a report on its cost of service, which presumably would show how much “administrative” cost there is, have been postponed at least till after the upcoming election.

Likewise, there have been delays to the commissioning of Itezhi-Tezhi and Maamba, mainly to do with the completion of transmission lines. These, and other transmission lines, for which Zesco in its monopoly position is solely responsible, seem only to be completed and energised when crisis strikes.

A second problem concerns the management of the resource. The contemporary excuse generally trundled out for Zambia’s shortages and brown-outs is the low level of Kariba. Certainly the dam is low, though rainfall levels are at the historical norm. Independent assessments at Mwinilunga of the 2014/15 season have them at 1,300mm compared to the average of 1,350mm. This does not constitute a drought in anybody’s language.

But be careful of what you wish for. Zambia may well have a very dry season in 2015/16. Given the low level of the dam at the start of the season, the worst consequences of the misuse of water may still be ahead.

This raises a key question: Why did Kariba not recharge from January 2015?

The only exception to the historical record of dam recharging is 2014/15 (the purple line on the above chart). This corresponds with the commissioning of the new North Bank turbines. As the Zambezi River Authority noted in July 2015, “It is notable that the lake has been drawn down considerably due to the higher turbine outflows than the inflows.”

Some suspect that the emergency 360MW North Bank generators, which are supposed to be employed for three to four hours a day as peaking units, have been run continuously, lowering the water level. If this is the case, where did the power go? If the power was sold, where did the money go?

Rather than focusing on solvable issues, the debate around Zambia’s (and Zimbabwe’s) energy problems has dwelled on the parlous state of the Kariba wall, for which a $300-million donor remedy is touted, thank you. But local engineers have refuted the risk posed by the hole gouged by incessant spillage, no less than 75m from the toe of the dam wall, not least since the spillage has reduced with constant turbine use.

The cost of poor power performance has compounded Zambia’s economic woes. The Minister of Finance, Alexander Chikwanda, said in parliament this week that the 2016 budget deficit will widen to 8.1 percent of gross domestic product from a target of 3.8 percent. He notes the economy was projected to grow at little more than half the original aim of 7 percent, and inflation was expected to come in at 15 percent, more than double its target.

It appears one of the remedies to the government’s forecast shortfall will be through increased power tariffs. By contrast, recognising its vulnerability to job cuts in the depressed copper sector, the government recently tabled a new “sliding scale” mineral royalty for the mines, designed to make their life easier. But as government giveth with the one hand, it… .

Southern Africa’s energy shortage is routinely cited as an impediment to growth and development. Nowhere is this more the case than in Zambia which has battled to keep pace with the demand for power, not for a lack of money or projects, but for reasons, largely, of political indecision and incessant manouevering. This can be expected to worsen as the political silly season moves into high gear with the upcoming August election. DM

Photo: People watch as the spillway gates are opened at Kariba North Bank dam on Lake Kariba to reduce rising water levels as a measure to protect the dam February 11, 2008. REUTERS/Mackson Wasamunu (ZAMBIA)

Dr Mills heads the Johannesburg-based Brenthurst Foundation.

  • Greg Mills
    Greg Mills
  • Business

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