Electricity time bomb
Consumers alike, whether domestic or commercial will have to brace for a stiff electricity tariff increase as highlighted at the NCCI Namibia Energy Policy Forum held in Windhoek on Thursday this week.
During NamPower’s presentation, Managing Director Paulinus Shilamba, on the projected future hikes said, NamPower’s Business Plan 2012/2013-2016/17 projects a 15% annual increase in average electricity tariffs plus a minimum 3% increase for cross-subsidisers of proposed electricity support mechanisms.
“It is not a secret, electricity rates are going to go up by 15%,” he added.
He said, “due to higher cost of import contracts and introduction of new power supply projects, electricity tariffs will continue to increase at a high rate after which prices will stabilize, in real terms, after the introduction of Kudu in 2018.”
In that regard, the Kudu project itself is in limbo after Tullow Oil, one of the upstream parties withdrew from the project which in turn poses a potential delay in the project’s delivery.
“Due to high economic growth and expiry of our contracts with South Africa, Zimbabwe and Mozambique, serious power supply challenges will be experienced in 2016 and 2017, if the proposed solution, the 250MW project, is not approved and commissioned on time,” said Shilamba.
He said the challenge that is associated with the continual importation of power, is that the figures will keep going up. For 2015 the high cost of imports will amount to N$2.4 billion, eventually reaching a total of N$10 billion over the next 4 years.
NamPower’s funding requires a collosal N$30 billion for new generation and transmission projects over the next 5 to 6 years with NamPower contributing N$15 billion (N$5 billion debts) and the Independent Power Producers contributing N$15 billion (equity and loans).
Despite the pending power problems, Shilamba assured consumers that NamPower had managed to find solutions for the period 2014/15 up to June/July next year and no serious power interruptions will be expected during this period.
At the same presentation, the Minister of Trade and Industry, Hon Calle Schettwein focused on the impact of a possible energy shortage on the economy.
He said it is possible, given the anticipated price hikes and the future interruptions, that manufacturers are likely to reduce overall production.
Schettwein added that manufacturers are likely to switch from producing high to low energy-intensive goods as well as opt to import instead of produce energy-intensive goods locally.
The minister suggested that the solutions to the power problem will be to increase competition in the energy sector as well as improve generation efficiency and productivity.
“Allow Independent Power Producers to enter the market through competitive bidding processes,” he said.