July 31, 2014

Politics, Policy Setbacks Stall Energy Growth in Zimbabwe

Strong political interference and policy setbacks in Zimbabwe’s energy sector threaten the country’s bid to generate an estimated 6,200 megawatts in the next decade

The country’s sole power utility only generates 1,300MW against a national daily demand of 2,200MW.

The Zimbabwe Electricity Supply Authority generates power from three local suppliers - Hwange Thermal Power Station, Kariba Hydro Power Station - and imports energy from Mozambique’s Cahora Bassa Hydro Power Plant.

As the nation reels under massive power cuts and load shedding, that cripple commerce and industry and make life a misery for residents, desperate calls have been made for the increased generation of power.

Moreover, Zimbabwe has grown and developed while the generation capacity has not increased. Government through REA has electrified 7,350 rural institutions thereby increasing the need for power.

Political interference
During the inclusive government, whereby the SADC brokered a power-sharing agreement between MDC and Zanu (PF) after the violent 2008 elections, the Ministry of Energy and Power Development, headed by MDC’s Elton Mangoma, was expected to generate over 6,200MW. This was made possible by the licensing of 18 Independent Power Producers (IPP) – who would ultimately make Zimbabwe a self-sufficient energy producer and an exporter of energy.

Mangoma was replaced by Zanu (PF’s) Dzikamai Mavhaire following the contested July 2013 polls, which returned Zanu (PF) to power.

Since Mavhaire took over the energy portfolio, very little development has been experienced. Only five of the 18 IPPs are operational.

Instead of creating a conducive environment for IPPs, which were cited as the panacea to the energy crisis, Mavhaire has been pre-occupied in solidifying the patronage system in the energy sector. He has dissolved all the boards that fell under ZESA and appointed Zanu (PF) stalwarts as heads of the boards - at the expense of a long list of technocrats.

The parastatals in the energy sector operated for four months without any boards at all. The affected entities included the Zimbabwe Power Company, Zimbabwe Electricity Transmission Distribution Company, Powertel, Zesa Enterprises, National Oil Infrastructure Company, Petrotrade, Zimbabwe Energy Regulatory Authority and the Rural Electrification Agency.

Prior to this the Zanu (PF) government ordered ZESA to write-off a $170 million debt it was owed by electricity consumers in unpaid rates as a token of appreciation from the party for being retained in power.

This further plunged the cash-strapped power utility in a financial crisis that has intensified load-shedding and frustrated efforts by energy experts, who have been lobbying government to provide a conducive operating field for IPPs to venture in renewable energy production.

The licensed IPPS specialise in solar, biomass, biogas, geothermal and hydro power. China Africa Sunlight Energy has a project that is expected to generate 600MW. We hope to connect 300MW onto the national grid by December 2016.

Mining conglomerate RioZim expects to produce 600MW from the planned 2,400MW Sengwa Coal Power Plant while De Green Rhino Energy is set to invest $5,2 billion for its 2,500MW solar project by 2020. There several other small projects.

Policy setbacks
However, IPPs are still facing policy challenges despite the deregulation of the Electricity Act and adoption of the Energy Policy in a bid to lure private players to invest in energy, thereby easing the pressure from ZESA.

Some of the projects have suffered from government bureaucracy, which led to some investors pulling out.

“Our license has been delayed and fears are that they might lose interest and pull-out,” said De Opper Trading chief executive office Francis Gogwe.

Their funding is a combination of equity and borrowings in offshore accounts as capital remains scarce in Zimbabwe due to high interest rates against loan duration of capital required.

Also, it has been established that for the hydrological conditions pertaining to Zimbabwe, for run-of-river schemes, a capacity factor of between 35 and 40 percent optimises the trade-off between the natural resource potential and the capital investment required to develop the resource.

Much higher capacity factors are possible if smaller capital investments are made but this is at the expense of the total annual electricity generated and this is clearly not in the national interest.

This is further worsened by the fact that the new generation plants being built - because of inflation – tend to cost more.

Ian McKersie, executive director of Nyangani Renewable Energy, said though the national policy and the regulatory structure were conducive to IPPs, the application of these in a clear, coherent, consistent and objective manner was required to attract investment.

“Government has set the scene for a vibrant IPP sector by the implementation of the Electricity Act of 2005 and the adoption of the Energy Policy. As producers of clean electricity we would like to see a Renewable Energy Policy developed that backs up government’s commitment to underwriting the viability of this form of energy,” said McKersie.

Environment Africa director Banarbas Mawire said government should adopt a policy framework biased towards renewable energy producers. This should involve lowering taxes and duty on the importation of the necessary equipment.

“Renewable energy could turnaround the energy crisis - but there is a great challenge in the sector as it requires high investment, due to the high cost of the equipment. If we are to fully embrace it, then government needs to reduce duty and tax for the investors who are importing their equipment into the country to erect such power stations,” said Mawire.

Energy experts also called for the politicians appointed to ZESA boards to be replaced by technocrats in order to bring sanity to the operations of the parastatal.

The energy regulator has since announced its intention to revise laws governing the industry to encourage investment in renewable energy in order to mitigate intermitted power outages.

However, the deputy Minister of Energy Engineer, Munacho Mutezo, recently revealed in the media that government is contemplating withdrawing some of the licensed IPPs as they have failed to take off – despite having been licensed for some years.

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