Guest Contributor | Jul 24, 2020 | 0
Power to become one of the most tradable commodities
Power trading agreements between countries that possess excess power generating capacity and those battling supply shortages will be a dominant theme in the electricity markets of south-central African nations in the next three to five years, says Standard Bank.
Mozambique, which currently has the potential to produce more electricity than its economy requires at present, is likely to dominate the supply-side of this trading market with Namibia, Zambia and Botswana expected be the main purchasers in the region, after South Africa.
The biggest challenge to these arrangements will be reliable and stable transmission networks to facilitate the seamless transfer of electricity between sellers and purchasers. These networks require significant co-operation between neighbouring countries, so the role of the Southern African Power Pool (SAPP) in ensuring cross-border planning, investment and trading between member states remains critical.
“Power will increasingly become one of the most tradable commodities across the region in the coming years given the electricity shortage we are seeing across Southern Africa,” said Cody Aduloju, Executive in Standard Bank’s Power and Infrastructure division.
“Almost every aspect of a modern economy relies on electricity to function so the countries that emerge as the ones with excess supply will have significant negotiating power, so to speak,” he added.
Namibia represents a huge opportunity for countries with potential oversupply in the region as it currently imports about 61% of its electricity needs. Given Namibia’s total power demand of 534MW, that would leave an estimated 320MW in possible supply deals up for grabs based on current peak usage of 508MW.
Namibia however, has several plans under way to boost its power generating capacity. These include 800MW from the Kudu combined gas and steam plant; 44MW in onshore wind potential and 120MW in solar PV potential.
“The lack of its own sizeable power generating capacity means that it is absolutely imperative for Namibia to start entering into Power Purchase Agreements (PPAs) with other partners in the region, which is currently happening,” said Mr Aduloju.
“From a financial perspective, NamPower is probably one of the strongest utilities on the continent so it has a lot in its favour in terms of entering into these PPAs,” he added.
Current agreements are being negotiated and finalized with South Africa and Mozambique.
Botswana is another country in the region that is likely to remain reliant on its neighbours for the foreseeable future given that the country already imports 68% of its power needs.
The SAPP members include utilities and private power producers from Botswana, South Africa, Mozambique, Lesotho, the Democratic Republic of Congo (DRC), Zimbabwe, Zambia, Namibia, Swaziland and Malawi.
Plans are also afoot to determine the viability of building a multi-billion project to build a power transmission network linking the power grids of South Africa, Mozambique, Namibia, the DRC and Angola.