Harare - As September unfolds its chapters, a captivating tale of power generation unfolds, with the baton passing from the Kariba power station to the Hwange Power station. This dramatic shift in reliance stems from lower water levels, disrupting the equilibrium. This change has been necessitated by lower water levels at Kariba, which disrupted its optimal functionality. However, as the month draws to a close, the Hwange Power station has risen to the occasion, compensating for the setback with a notable surge in production. The occurrence of lower water levels at the Kariba dam following the elections raised concerns among many, leading them to question whether the stable electricity situation was merely a tactic to appease voters.

Yet, not all is a tale of triumph. Power shortages have cast their shadow upon the land, partly due to diminished water levels at Kariba. However, it seems that the government has taken a bold stance, further cutting down on imports from the Southern Africa Power Pool, intensifying the situation. With the extractive industry expanding at an exhilarating pace, energy requirements have consistently soared by over 20% each year for the past three years, painting a vivid picture of the pressing need to meet these escalating demands.

In the dynamic landscape of 2023, the hunger for electricity has reached unprecedented heights, soaring to a staggering 2400MW, a remarkable leap from the modest 1200MW consumed back in 2008. This surge in electricity demand can be attributed to the surge in the extractive industry in Zimbabwe.  Anticipating this surge in demand, applications for new connections totaling 2300MW from domestic sources are expected to be integrated into the grid within the next three years. This growth is largely driven by the booming extractive sector, which anticipates a 25% increase in demand for lithium over the next 18 months.

Currently, the average daily electricity generation ranges from 1300MW to 1600MW. However, concerns arise as the Kariba power station's electricity production has experienced fluctuations, dropping as low as 300MW in September, indicating the potential impact of El Niño on power generation in the country. Conversely, Hwange Power Station has seen a substantial increase in production, rising from an average of around 540MW at the beginning of the month to 975MW as the month concludes. This suggests that Unit 1-6 at Hwange might also be contributing to the overall electricity production.

Given the potential threats posed by El Niño to the Kariba power station, which currently contributes 800MW to the daily electricity production, power cuts are expected to become more frequent in the future. The heavy reliance on Kariba for electricity generation makes the country vulnerable to supply disruptions.

In the region, both Zambia and Mozambique are experiencing electricity surpluses and are expected to continue growing. Mozambique benefits from access to gas resources, which helps to lower electricity costs. Furthermore, Maputo's upcoming power station, with a capacity of 2000MW, is set to be operational next year, and approximately 900MW of its power will be available for export.

Namibia anticipates the commencement of Africa's first green hydrogen power plant, which is projected to start generating electricity by 2024. The Swakopmund project, valued at 3.1 billion Namibian dollars ($181.25 million), will provide clean and uninterrupted power supply, contributing to the nation's electricity needs. This development is significant for Namibia, as it imports approximately 40% of its power from neighbouring South Africa.

However, South Africa faces challenges with its electricity output at the Koeberg Nuclear Power Station near Cape Town. If the ongoing unit upgrade program experiences further delays, the station's Unit 1 could see its electricity production drop to zero by November. The project to replace three steam generators began in December of the previous year, originally scheduled for completion within six months. Unfortunately, the undertaking has encountered multiple delays, exacerbating the existing issues faced by ESKOM, South Africa's power utility.

It is worth noting that Zimbabwe exports 80MW of electricity to Namibia, facilitated by the assistance provided by the Southern West country in refurbishing Hwange Units 1-6 in Zimbabwe's past. This collaboration highlights the interdependence and mutual support among neighbouring nations in the region.

According to a recent report released by the Zimbabwe National Statistics Agency (ZimStat) last week, the country witnessed a significant decline in electricity imports during the second quarter of this year. The report reveals that 375.9GWh of electricity was imported, reflecting a 56.5% decrease compared to the 863.4GWh imported in the first quarter. Notably, during this period, Eskom of South Africa supplied 50.6% of the imported electricity, Hidroeléctrica de Cahora Bassa of Mozambique accounted for 36.8%, and Electricidade de Moçambique contributed 5.8%. Currently, none of the neighbouring countries are supplying electricity on credit terms.

However, the mounting debt burden poses a significant challenge for Zimbabwe's power utility, ZESA. With a debt bill standing at 1.3 billion dollars, ZESA is unable to service its liabilities, including the assistance received from China for units 7 and 8. Consequently, relying on ZESA as a reliable power provider becomes increasingly uncertain. The government had initially stated that the introduction of Hwange Units 7 and 8 would eliminate the need for electricity imports. However, the subsequent rise in frequent power cuts soon after elections suggests otherwise, and unfortunately, this situation is expected to worsen in the future.

As a result, many companies within the country have turned to solar power as a viable alternative. At Equity Axis, we strongly recommend solar power as a more favourable investment option for companies, considering the current state of affairs with ZESA. Presently, the nation's installed capacity ranges between 600-700MW, and with decreasing costs of solar technology and batteries, the adoption of solar power is becoming increasingly attractive.

It is crucial to note that international funding for coal projects has significantly diminished due to the global shift towards cleaner forms of energy in response to climate change. This dynamic further emphasizes the importance of transitioning to cleaner and more sustainable energy sources.

There are ambitious plans to construct six new power stations along the Zambezi River, with the aim of generating 1300MW of electricity within the next seven years. The cost of these projects, to be shared with Zambia, is estimated at 60 million US dollars. Additionally, a new dam on the Zambezi River is in the works, with a budget of 4.5 billion dollars and a projected construction timeline of five years. Out of this budget, 1.5 billion dollars will be allocated to address transmission inefficiencies in the power distribution system, as the current infrastructure of ZESA has become inadequate.

In 1997, ESKOM was recognized as the best functioning power utility in the world. However, over time, the situation has deteriorated, largely due to complacency and taking the energy sector for granted. Zimbabwe should learn from this and understand that continuous investment is essential to sustain the energy sector's functionality.

In addition to the lack of investment, the under-pricing of electricity has also weakened ZESA. Currently, industrial companies pay 12.21 US dollars per kilowatt-hour, while individuals pay a heavily subsidized rate of 10.63 US dollars. This significantly impacts the capacity of the utility to provide meaningful services. A tariff adjustment reflecting the true cost is necessary. At Equity Axis, we believe that a cost-reflective tariff averaging 16.08 US dollars would be a suitable balance. However, addressing the transmission deficiencies within ZESA is also crucial.

There have been instances where tariffs for the ferrochrome industry were set so low that the cost of delivering electricity exceeded the industry's payment. This highlights the urgent need for investment in the sector. Additionally, companies should prioritize power efficiency by using energy-efficient equipment, especially in mining operations where outdated pumps and machines consume unnecessary amounts of electricity. Cooperation between companies and ZESA to eliminate inefficiencies will result in improved power flow and reduced wastage.

By investing in infrastructure, implementing cost-reflective tariffs, and promoting energy efficiency, Zimbabwe can enhance its power sector's performance, ensuring reliable and sustainable electricity supply for the nation.

While ZESA's inefficiency has played a significant role in the current dilemma, it is crucial to acknowledge that the operating environment has also contributed to the challenges faced by the power utility. During the hyperinflation period in 2008/2009, the currency conversion had a detrimental impact on power generation. Debts owed to ZESA, amounting to 1.2 billion US dollars, were converted into Zimbabwean dollars. This conversion had severe repercussions on the financial stability of the utility.

Currently, many individuals and businesses are taking advantage of the arbitrage opportunities that exist in the economy. They opt to pay their ZESA bills in local currency rather than in US dollars, as the official exchange rate is significantly lower than the black market rate. This dynamic further compounds the financial strain on the power utility. It is important to note that such arbitrage opportunities have also affected large companies like Econet.

In response to these challenges, private arrangements have emerged as a way forward for companies in the country. DISCO, for example, has plans to develop three greenfield power projects with a combined output of 300 megawatts. These projects will supplement the national grid's supply and cater to DISCO's electricity requirement of approximately 500MW. The first phase of a steel manufacturing plant, set to be commissioned in December this year, will benefit from these additional power projects.

Similarly, Zimplats, a major mining company, has resorted to importing 50MW of power from Zambia while simultaneously constructing a solar plant. This strategic move aims to secure more energy to power their US$1.8 billion expansion. While such initiatives may be feasible primarily for larger companies, other businesses should observe how corporations are integrating renewable energy solutions and explore alternative options that can work for their operations.

By embracing private arrangements and exploring renewable energy alternatives, companies can mitigate their dependence on ZESA and contribute to a more sustainable and reliable power supply for their operations.


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