Rapid power upgrade will impact tariffs

The synchronisation of the new Hwange Unit 7 this week so it has started feeding power to the national grid, with the similar work on Unit 8 imminent, will help alleviate the significant power shortages in Zimbabwe, but will not end them.

The economic growth we have already seen over the past five years, plus the accelerating mining, industrial, commercial and residential growth in progress, means that we need a lot of power and that new generating capacity will have to be commissioned at ever faster rates to catch up on the shortfall and then keep Zimbabwe ahead of needs so development can continue without power constraints.

The new twin thermal units at Hwange should be generating 600MW by October, with Unit 8 coming on line more quickly than Unit 7 did since the Zesa engineering teams are obviously gaining a lot of experience quickly. Zesa has noted that the it takes about two to three months once a new unit is on grid to build up from the initial 40MW to the full 300MW, largely due to the normal running-in process needed for all new machinery. But at least we have reached the stage where power is coming into the grid from this third phase at Hwange.

The annual Zambezi River flood season is likely to start soon. Most water that reaches Lake Kariba comes from Angola and the north-west of Zambia, with Angola predominating. While the Zambezi never dries up, the gap between low flow and high flow is wide because rainfall in almost all the catchment is very seasonal, occurring just in the southern African summer.

The Zambezi River Authority tries to even out this flow when allocating water to the two Kariba power stations, using the massive storage capacity of Kariba Dam, so they can generate the same average output every day of the year. So much of the flood water that arrives over around three to four months needs to be stored and stretched out over the next eight to nine months. The ZRA also like a modest reserve so that if the next rain season in Angola is a drought Zesa and Zesco can still generate reasonable amounts even if they have to cut back.

We now know that the low flow Zambezi can allow the stations to put out between 200MW and 300MW, that is using the water that flows into the lake each day in the low season. So there is never any danger that the Kariba stations will have to close down, only that they will be running on severely reduced output if there are no flood waters and no storage.

Generall ZRA estimates that in normal use in normal seasons it can allocate enough water to allow each power station to generate an average of close to 600MW over the year. Both power stations have taken their capacity to over 1 gigawatt, 1050MW on the south and 1080MW on the north, near twice the likely averages.

The reason is to give them the ability to cope with the huge daily fluctuations in demand. The main spikes in demand occur in the early morning, when high domestic demand coincides with the start up of many factories, and in the evening when industry and other business are still going strong and the domestic demand starts spiking as everyone cooks dinner and uses hot water.

Zesa and Zesco can then with their expanded stations push output up to a 1GW each, but to make the daily average need to cut back sharply at other times, perhaps just running one generator each in the early hours of the morning. Hydro stations are particularly suited to coping with huge fluctuations in demand since generating units are so easy to switch on and off in a few minutes.

For Zimbabwe this requires a good base load, that is the 24hour supply, which Kariba can then top up with a modest extra at low demand and flat out at high demand. That is what Hwange Thermal should be used for, as the other major station in Zimbabwe. In any case thermal stations work better and more efficiently with more continuous running than through flicking the on-off switch frequently.

The older six units at Hwange, the four 120MW units from the early 1980s and the two 220MW units from the middle to late 1980s are at present, in ideal conditions, rarely managing to generate much more than 400MW. A rehabilitation programme is planned with finance already arranged, but this will take at least two years as parts and modules of the six units are replaced, reconditioned or rebuilt.

Two units at time will be down during this process, but that will only reduce output during the first two. Once they are back on at full output there will be no more decline.

But even with those six and the two new units on line, Hwange will have an output of just 1,52GW, but for practical working this will likely to be a bit less as one unit at a time will normally be down for routine servicing, largely to ensure that there are no major faults and sudden drops. Some routine maintenance was missed at Hwange in past years, and now there is the problem of more frequent faults and the need to compress three decades of overhaul and missed maintenance into a two-year refurbishment.

So Zimbabwe continues to need new capacity, quickly, from public and private generating stations. There are several private companies licensed to generate for sale to the grid, although few have even entered the initial construction stages. While there is a second large thermal among the licences, most are for solar which can be commissioned in stages as each large field of solar cells is installed. This will help with daylight supply, allowing Kariba to back off and store more its daytime off-peak water so it can put out more when there is no sun.

Assuming the extra capacity can be brought onto the grid fairly quickly, supplemented by modest output from the solar panels many businesses are installing with the dual-use meters that allow surplus to be sold to Zesa and Zesa power to be bought when needed, the question of costs will arise.

Each input of power will be costed separately, whether generated in a Zesa station or in a private station. The cheapest, easily, will be Kariba power. Most of the capital charges were eliminated long ago when the dam wall was paid off, and while Zesa has to factor in the maintenance costs, which include regular overhaul of equipment and replacement parts at intervals, and even the work now being done on the plunge pool, these are inherently lower than at a thermal since there are fewer stresses and less wear on less equipment. Hydro power is free, it just flows down the river.

Thermal stations have their capital costs to recover, and Zimbabwe will be in the position of having to cope with the new half of Hwange and the large refurbishment costs, still less than half the costs of new, for the older half. And then a thermal station burns a lot of coal every day and miners want to be paid. So it will be several times the Kariba price per unit.

Solar, like hydro, has free fuel, the sun, but the capital costs per megawatt output are still significantly higher as are maintenance costs. To get a tariff card, Zesa has to factor in the cost of each contribution. Every power utility with more than one station needs to do this price mixing, but usually has a range of stations commissioned at intervals so can mix older and cheaper power with more expensive and newer power to get a price.

Zesa has the problem that the only older power will be the original six units at Kariba. The two new big units, that provide the 400MW spike capacity are less than five years old. The new 600MW at Hwange join them in the new bracket, and even the refurbished 920MW at Hwange will be largely new. The solar additions will be new.

Consumers want the cheapest possible power, but want it 24/7 and in adequate supply. Skimping on maintenance to cut costs is not an option. We now know what happens. Eskom of South Africa has the same problem now as it catches up on skimped maintenance.

Zesa tariffs are set, or confirmed, by a regulator, the Zimbabwe Energy Regulatory Authority and now ZERA is going to have to upgrade its procedures to create adequate tariffs to ensure generator owners can produce, but without funding waste, padding or inefficiency. With multiple sources and types of generation this will require some very complex calculations, and ZERA need to do these independently of what Zesa and others selling power to Zesa are doing, at least to double check the requested figures. This will require extra expertise, but as some of that extra is to set up a mathematical model that will produce a tariff card once the factual information is fed in, that expertise can be largely short-term.

Consumers are almost certain to have to expect higher tariffs. There seems no way to avoid that as the percentage of the cheapest Kariba power in the mix continues to fall. But the increases first of all must be justified, independently, and the quid pro quo must involve a 24/7 continuous and adequate supply. As each new source and station comes on line the tariff card will change.-ebusinessweekly