Introduction
From
the middle of 2015, the hours of load shedding that Zambians are being
subjected to has been steadily rising. There is little to be gained from
finding people to blame for our current situation and frankly there is more
than enough blame to go around. The unfortunate result of the blame game will
however be to distract our attention and full faculties to implementing a
lasting solution to our current woes. On one side of the triangle we have the
Zambian people, on the other sides we have the Patriotic Front Government and
lastly we have the energy cluster (comprising Energy Regulation Board and
Zesco).
The
Zambian People
The
year 2016 is an election year in which the Zambian people will file their
report on the performance of the Government. To date, the people have been told
that the current electricity deficit is beyond human control and was pretty
much inevitable due to the fact that God has not blessed us with enough rain
for two consecutive rain seasons. Not much has however been said about the change
in the consumption pattern of water for hydro-electric power generation. The
running of an additional 360 MW of hydroelectric power generation capacity at Kariba North Bank Extension has not
been widely discussed. Zambians have seen the hours of load shedding carried
out by the national vertically integrated Government owned utility Zesco
increase from 2 hours daily to 10 hours in the last 12 months. In addition, the
people were asked to pay an increased amount of money to the utility through a tariff increase that
was implemented on 1st December 2015. The people were told that the
tariff increase was unavoidable and needed to be done to make tariffs cost
reflective. The load shedding continued despite the tariff increment and the
tariff adjustment has been subsequently reversed on
the instructions of the President in the face of a public outcry. In the face
of this about turn, the question arises: what next? Everybody considers
themselves an expert on electricity because it only needs you to flip a switch
for you to know whether it is there or not. If it is not, then someone is not
doing their job. Regardless of the
complexity of the industry required to deliver power, the urge is to blame
someone for this failure.
The
Patriotic Front Government
Over
the years, it will have been noted that the Patriotic Front Government has had
an uneasy relationship with the energy sector. Amongst one of the first actions
of the Government on taking office was to launch a probe in to the operation of
the Energy Regulation Board (the national body responsible for the regulation
of the energy sector in Zambia). To date the recommendations and findings of
this Commission of Inquiry have not been made public however the top leadership
of the institution at both Board and managerial level were replaced. A similar
change was effected at the national utility Zesco with both the Board and
Management undergoing a change. At present, while the Chief Executive of the
company has been appointed,
there is still no supervisory Board in place for the utility.
The
post of Minster of Energy and Water Development was combined with that Mines as
one of the first changes made by the PF government. President Lungu has since
separated the Ministries again. In terms of government energy policy, the PF
manifesto of 2011 acknowledges the failures of the MMD to invest in energy
infrastructure. The following are the measures outlined to address this
situation in the electricity sub-sector:
·
Accelerate
and scale up public private partnership investment in hydro power generation to
raise the installed capacity in order to meet national demand and surplus for
export
·
Promote
investment in alternative energy sources such as thermo electricity generation
form coal and nuclear reactors
·
Promote
investment in the development of renewable energy sources such as solar,
bio-fuels and wind
·
Accelerate
the provision of electricity to rural and peri-urban households at subsidized
rates
·
Promote
the development and use of other alternative fuels in households such as
liquefied petroleum gas and ethanol gel fuel so as to reduce dependency on wood
fuel
·
Unbundle
the public power utility Zesco into (i) generation (ii) Transmission,
Distribution and Customer Service to improve its efficiency
·
Promote
private sector involvement in generation, particularly using renewable energy
such as biofuel or small scale hydro
·
Review
the regulation of the energy sector
The implementation of the
above measures may have fallen short due to the fact that the methodology of
funding the measures outlined above is not clear. All the investment measures
can only be attractive if investors are clear that they can recover their costs
from the market and also make a profit through an independently regulated
tariff. Clearly also in the period, some work could have commenced to review
the structure of the public power utility. The re-structuring of such a large
parastatal with such a large impact of the economy would require a level of
buy-in from the public and also from politicians who may not share the
political ideology of the government. It would also require the assembly of a
team of talented men and women with a mandate to change the energy sector over
a period of at least 10 years without being subjected to the shackles of political
capture. Whilst it is clear that some of the measures have been implemented,
the absence of an electricity market means that we will not be able to record
substantial growth or investment in the absence of private sector investment
and transparent regulation. In the words of Oliver Wendell Holmes Sr.
“To reach a port we must sail, sometimes
with the wind, and sometimes against it. But we must not drift or lie at
anchor.”
The
Energy Cluster
At
present, it is not clear where the industry (Zesco and ERB) will find itself in
the ten years. In the past ten years, the top leadership of both the Energy
Regulation Board and Zesco has not been stable. Whilst the Energy
Regulation Act makes provision for the appointment of appropriate professionals
to the Board such
as engineers, economists, lawyers and accountants, the Board members have been
drawn from other backgrounds. These have included District Commissioners, traditional
leaders and religious leaders. Zesco Limited has also under gone a lot of
changes at Chief Executive level. In the past ten years, the company has had four
different Managing Directors. In at
least three of the replacements of Managing Directors, a purge of top management
has also taken place. For a company of the size of Zesco, it is clear that this
loss of management human resource would affect overall performance however these
skills will still available to the private sector in a restructured energy
market.
The
Blueprint
There
is need to increase availability of electricity to households from a national
penetration rate of 19% and also to deal with the expected increases in
domestic consumption to be expected as the burgeoning middle class invests in
appliances such as fridges and air conditioners. Whilst investment may be made
in generation, we may find ourselves struggling to deliver the power to
household customers due to underinvestment in the distribution of power. For
real progress to be recorded in this area, the institutional framework of both
the above institutions must be enhanced. An example is that one term of an
Energy Regulation Board member has been limited to three years. A Board member
also is limited to two terms. This means their skills are only available in
this role for six years. In other jurisdictions where significant reforms have
taken place, most regulator terms are now at around five years. This allows for
a planning horizon of at least ten years. The Energy Regulation Board and the
Ministry need to implement a ten year plan and identify the correct people to
carry this plan forward. This plan should involve some of the following issues:
1.
Attracting
at least $4 billion of private sector investment into the sector (significant
attention must be paid to political risk)
2.
Completion
and implementation of an Electricity Master Plan (this should be a document
produced by the Ministry of Energy)
3.
Immediate
eradication of load shedding
4.
Metering
of all customers
5.
New
connections (doubling penetration in the next ten years)
6.
Restructuring
of Zesco
7.
New
generation capacity (doubled in the next ten years)
8.
Cost
reflectivity of tariffs to be married with costs of new connections and new
generation and ensuring we never undergo load shedding again
9.
Immediate
implementation of energy efficiency and demand side management programmes that
have significant commercial impact
10. Guidelines
for the management of shared water resources so that it is more transparent to
the public
Solar
energy has been targeted as an area in which large expansions can be made in
generation capacity. Under the current structure, however, the cost of
underwriting the implementation of such technologies will fall on the Government.
In a restructured market where distribution of power has attracted private
sector investment, this charge on the Treasury would be avoided. This injection
of private capital would also serve to reinvigorate investment into the generation
sector. Our continued insistence that power is “cheap” has led us into this
cul-de-sac. Cheap power is a fallacy and the time to realise that we have to
pay for power has now come. Fundamentally unless we all accept a change must
happen and now, load shedding will continue as the politicians will be wary to
implement the immediate reforms required to change the status quo.
As
an immediate measure, a target must be set to end load shedding in the next two
months. The cost of unserved demand in the market will continue to devastate
the economy. It should also be noted that while the public embark on a spree of
buying and installing inverters, the battery charging load will adversely
affect the grid. Whilst there appears to resistance to increasing the use of
diesel power for large scale electricity generation (greater than 50 MW), in
the face of the needs of the Zambian people, there is a compelling case for
such sources of power to be in the market for a long time into the future. The
flexibility such solutions can provide cannot be ignored. These include quick
start up and shut down and also the capability to open a market for renewable
energy sources by combining the diesel used in such generators with biofuels.
We also have large hydroelectric power generation sites that have been
identified but we are still struggling to attract investment into these sites.
The
question then arises,”if we know what to do, why aren’t we doing it?” Therein
lies our dilemma.
