Load shedding – time for reforms in electricity sector

Editorial
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Eng Geoffrey Chishimba Chiyumbe
I was doing my usual research and came across this article as a sentiment from a concerned Zambian citizen in response to Zesco’s announcement on extended load shedding hours. Below is an extract.

“Zesco is a failed project. They should not hide under the canopy of load shedding. They should come in the open and tell the nation that the machines they are using are obsolete. They need replacement and recapitalization. It is a disgrace to have an institution which is not run viably. Zambians have been subjected to a lot of heartaches and unnecessary hyper tensions owing to lassie fare attitude from people who have been assigned to run the welfare of the nation,” end of extract.

This is not far from what one gets from across the general populace in Zambia though various views exist depending on which side of the divide you are on. Nonetheless we are all affected and load shedding is real.

Governments past and present have all looked at this challenge of low water levels in our reservoirs caused climatic change and have made efforts to come up with ways to have sustainable electricity as it is the engine of the economy.

Despite all the well-meaning efforts we still are at the same spot. What is really the issue and how do we move forward as a nation to avoid this cyclic journey taking us nowhere?

It cannot be business as usual (BAU). Action is needed all concerned – Government, Zesco and end users.

In Zambia one cannot divorce Zesco from the electricity sector. Any challenges in the sector are attributed to Zesco and so any mitigation measures cannot exclude but start with Zesco.

Role of Government toward Zesco

Our power entity must be managed as a viable commercial entity though with a social flare and be able to pay its dividends to the Government every year. There are holes in Zesco currently and these need to be sealed as top priority. This means we look at how it is governed and managed to ensure efficiency is enhanced, it is effective in the delivery of its services and there is accountability in the way it conducts its business.

Governance of Zesco

Government as the shareholder on behalf of the Zambian people must ensure governance systems are in place in line with globally accepted best practices.

Management of Zesco

Government through the properly appointed board to seriously support and provide strategic direction to the able and committed management team.

Cost reflective tariffs

There are holes within Zesco that need to be immediately sealed and these are due to poor project finance structuring, inflated internal projects coupled with uncontrolled spending. This amongst others make the utility inefficient. In the absence of serious reforms, the tariff increase will not resolve the utility’s unsustainable financial performance. Once the current holes in Zesco are sealed then introduce cost reflective tariffs.

The tariff adjustment application made few months back was based on the revenue requirement of the utility to cover all its costs including financing some bond needed to offset some historical debt.

Zesco needs a steady revenue to provide capacity to pay for such a bond. If the tariff is not granted the utility will fail to get the much needed bond and consequently face increasing debt from the IPPs and other suppliers.

Transformed Zesco therefore needs a cost reflective tariff. End users of electricity will not resist this move once they know they are paying for a quality service and the tariff is justified. The electricity industry in Zambia must not be run as a charity. It costs money to generate, transmit, distribute and supply electricity to the end user. The three key stakeholders (Government, Zesco and end users) to this process all understand this and are in agreement. The power of three – Triple Entente – always brings positive results.

Independent Power Producers (IPP’s)

It is the policy of the current PF Government to have increased private sector participation in the electricity industry especially the generation sub sector. We need external players in this sector and this will be possible once the Government cleans up the current status quo. This will create confidence within the private sector and as a consequence developers will be attracted to come and invest in Zambia.

Water resource management in the reservoirs

Government working together with the new Zesco and IPP’s involved in hydropower will have to seriously look at how to sustainably – efficiently and effectively – generate electricity using the available scarce water resource. There is additional potential to increase electricity generation at existing hydropower plants expanding storage, upgrading equipment, and increasing efficiency. The hydropower technology employed need to be reevaluated. For instance do we procure new turbines that are water guzzlers? Depending on local water resources and capital and operating costs the following can be employed:

 Use alternative (or degraded) water sources.

 Use dry or hybrid cooling technologies.

 Increase the plant’s thermal conversion efficiency.

 Recycle water within the plant.

Electricity generation mix

Government to promote the use of other sources of energy to generate electricity in addition to hydropower technologies. These include solar, biogas, wind, nuclear Etc. amongst other renewable energy sources. Concerning nuclear energy, In light of the perennial power deficit in the sub-Saharan region, Southern African Development

Community (SADC) countries are at different stages of exploring nuclear energy as an alternative source of power. Despite the potential and interest of nuclear technology in the region, there still remains significant challenges to adopt the technology because of its high capital costs and also dangerous.

Have a creditworthy central buyer of electricity

This will own and operate both the transmission and distribution networks. He will also be the system operator responsible for operating and controlling access to the electricity network in the country. Currently this role is performed Zesco but the challenge is the financial liquidity state in which it is. It is not creditworthy.

This state is what is crippling the electricity industry in Zambia. IPP’s selling power to Zesco need to be paid on time as per existing contractual agreements for them to be in business.

This also includes all suppliers of goods and services to Zesco, and also its ability to settle outstanding loans. This entity needs to have money to recapitalize the existing assets which are old and aging.

The moment the above measures are implemented, we are going to witness a change in the electricity industry and Zambia will be energy content and be able to export surplus power to other countries within SADC and beyond. The issue of a power firm being technically insolvent will no longer exist in our mother Zambia.

The author is a Zambian Country Director representing Trans Africa Projects (TAP), an Eskom subsidiary. Eskom is a power utility firm in South Africa and a global powerhouse in the electricity industry.

He is a member of the Engineering Institution of Zambia (EIZ – Professional Engineer), Engineering Council of South Africa (ECSA – Pr Eng) and South African institute of Electrical Engineers (SAIEE). A product of UNZA School of Engineering, with more than 23 years post qualifying practical experience attained from both Zambia and South Africa.

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