Electricity: Waiting for the rains

Zimbabwe’s current power crisis has no quick-short-term solutions and the Southern African country is literally hoping for a good rainfall season to boost water levels at Kariba Dam, its biggest power plant, Business Weekly can report.

The country plunged into the current power situation partially due to the negative effects of climate change, which saw water levels in Kariba Dam significantly dip, reducing Kariba Power Station’s generation capacity to just 200MW in the last three days out of a possible 1 050MW.

Moreover, Hwange Power station, Zimbabwe’s second biggest electricity plant and base-load station, is generating an average 300MW out of an installed capacity of 920MW, as aging equipment means it can’t generate at optimal level.

Zimbabwe’s power output in the last few days is averaging 500MW out of peak demand of 1700MW.

This leaves the country with a power deficit of approximately 1200MW. Kariba Power Station’s deficit of 850MW can only be met if there are good rainfalls north of Zambia.

The expansive Barotse plains north of Zambia reportedly need to soak up water and get saturated during the rainy season before it releases excess water, which then finds its way into tributaries and rivers that eventually empty into the Zambezi River.

Water from the river’s catchment areas normally reaches Kariba Dam around April and May, with the dam reaching its peak levels for the season around July.

But again, this is conditional on the catchment area experiencing a good rainfall season.

The past few seasons haven’t been that good, resulting in reduced flows into the world’s largest man-made dam.

As of yesterday, only 2,68 percent of usable (live) water was still available in the reservoir. At the same time last year, usable water stood at 23,10 percent.

Economists who spoke to Business Weekly said the power crisis in the country would likely have a serious negative impact on the economy if not resolved and has the potential to reverse the short-term gains on price stability.

Former Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee member and economist Eddie Cross said the Government and private sector should work together to find long-term solutions to the power crisis.

“The power crisis will have a serious impact on the economy if it is not resolved. It will increase the cost of doing business and may make a lot of economic activity impossible,” he said.

Limited imports

While the Government during the week said it would import more power from the region and ramp up local production to ease the power cuts, the immediate interventions would likely still leave a huge deficit to meet demand.

At a briefing after the Cabinet meeting on Tuesday, Secretary for Energy and Power Development Engineer Gloria Magombo said plans so far entailed importing just 190MW.

She said the country had agreed with EDM to increase supplies to 50MW from 10MW, while there is an agreement for a further 150MW from Mozambique.

Eng Magombo did not announce any plans to import additional power from Zambia or South Africa. The two countries are also facing power challenges of their own although there are agreements to import 100MW from each.

Economic impact

Economist Vince Musewe said consistent power was essential for any business, but once availability got disrupted, it normally distorted pricing and product stocks, particularly those that need to be kept refrigerated.

“As a result, people and businesses are going to reprice their products to regain their profit margins and it is inflationary and we might also see artificial shortages of goods.

“Therefore, this is not good for the economy, and the sooner it is addressed the better,” he said.

Investment analyst Enock Rukarwa added that while demand-pull inflation through the monetary transmission mechanism seems waning, cost-push inflation emanating from power outages is the new elephant in the room.

“Baring imminent solution to current power challenges, prices of basic commodities will start creeping northwards.

“Given relatively high fuel prices, solar energy becomes the next best and optimal energy source,” he said.

However, he noted that installation lag for heavy energy consumers may be discouraging for continued production in the short to medium term.

Following the government measures to tame inflationary pressures and exchange rate volatility, the economy has witnessed a slowdown in inflation while the exchange rates have not changed in recent months at the same time prices of various commodities, goods and services have stabilised.

However, another economist Prosper Chitambara said there was going to be an increase in the prices of basic commodities in the short to medium term.

“Any increase in the cost of doing business and production has a knock-on effect on pricing. Electricity and energy is a key input in any production process in any business activity, so there is definitely going to be a rise in cost,” he said.

He noted that the outages had been most severe hence the effect will be felt, threatening to reverse the gains that have been achieved on prices in recent months.

“Therefore, this is something that needs to be looked at holistically and comprehensively. The challenge may not be addressed in the short term given the water levels in Kariba.

“What we are hoping for is a better rainfall season which will boost water levels at Kariba and other hydroelectricity production plants,” he said.

Chitambara was optimistic that Hwange unit 7 which is expected to be ready this December will bring in an additional 300MW onto the national grid.

Cautious approach to unit 7

But Magombo was cautious on when unit 7 will be in full swing as the commissioning phase will continue for a further period to make sure that the power supply is stable.

“Commissioning of a plant is not an event, it’s a process. When we talk about commissioning Hwange 7, each part has to be commissioned independently and certified as working 100 percent, before they move on to the next one.

“If there’s something not working properly, they have to stop, look at it, and correct it. As they do that, they look at the critical path in terms of when they can put that unit on the grid,” she said.

Not much improvement in power generation is expected from the old units that constantly break down because of old age and poor maintenance.

Coal supply concerns

Apart from recurring plant failures at Hwange station, there are growing concerns about coal shortages as producers have become “heavily incapacitated” due to non-payment of supplies. Already, small plants—Harare, Munyati, and Bulawayo–are not operating fully because of coal shortages, an industry body said.

Coal Producers Association (CPA) chairman Linos Masimura told Business Weekly in an interview that the miners had become so incapacitated “to even fail to load the trucks.”

Three companies—Zambezi Gas, Turbo Mine, which is mining in Hwange western areas, and Hwange Colliery Company Ltd are supplying coal to thermal plants.

Makomo Resources, which had overtaken Hwange Colliery as the country’s largest coal miner, is facing serious viability challenges and is under corporate rescue.

“We haven’t been paid for four or so months and the viability of producers is now severely eroded; they (ZESA) have basically taken all our working capital,” said Masimura.

He said coal miners were capable of supplying ZESA’s coal requirements for all plants. “But it is now a matter of them paying and collecting,” said Mr Masimura. “They are collecting revenue from their consumers but they are not paying us. Why?”

In an interview with Business Weekly, ZESA executive chairman Dr Sydney Gata confirmed owing the coal miners, but downplayed concerns about supply disruptions.

“At all times, there is always a balance to be paid but the problem with some of the coal producers is that they can’t even wait for two weeks to get paid,” said Dr Gata.

With Hwange unit 7 expected to come online in the next few weeks, according to official timelines, concerns have been raised over the adequate availability of coal.

Industry players said it “is unlikely” that companies that were awarded contracts to supply coal would be able to meet demand. The contracts were awarded to Turbo mine, linked to businessman Billy Rautenbach and Hwange Colliery Company Ltd.

“Some of our members had expanded capacity in preparation for units seven and eight but sadly, only two producers were awarded the contracts,” said Masimura.

“We formally raised dangers of risk concentration, especially when dealing with a project of national significance,” Masimura, who is also managing director of Zambezi Gas added.-ebusinessweekly